Investment Bond 'income'?

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UncleDan
UncleDan Posts: 3 Newbie
in Savings & investments
A friend has Investment / Distribution Plans from which up to 5% can be withdrawn without tax implications. I don't think this is classed as 'income' as far as means testing for grants etc. is concerned. Am I right?

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  • dunstonh
    dunstonh Posts: 116,596 Forumite
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    The capital is disregarded for means tested benefits but the withdrawal should be included.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • UncleDan
    UncleDan Posts: 3 Newbie
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    ..But it's to all intents monthly withdrawals from a savings account or investment, which can be turned on & off. If regular amounts are withdrawn from say an ISA or bank savings account, it's not income.
  • xylophone
    xylophone Posts: 44,585 Forumite
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    Interest is income. Dividends are income.

    No tax is paid on interest arising from an ISA - no additional tax is due on dividend income from an ISA.

    However, money whether in isas or in any other type of account is capital.

    Capital may be taken into account for means tested benefits.

    These bonds that your friend has are insurance bonds of some kind where the 5% withdrawals are regarded as return of capital although they supplement income?
    http://www.ageuk.org.uk/money-matters/claiming-benefits/means-tested-benefits/ will be worth a look.

    Your friend will need to clarify how this income/capital return is regarded?
  • dunstonh
    dunstonh Posts: 116,596 Forumite
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    .But it's to all intents monthly withdrawals from a savings account or investment, which can be turned on & off. If regular amounts are withdrawn from say an ISA or bank savings account, it's not income.

    But then the capital in a savings account or ISA is not disregarded.

    Investment bonds are a tax wrapper. Tax wrappers have specific rules.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • UncleDan
    UncleDan Posts: 3 Newbie
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    Thanks for responses. My mate in this instance is not required to declare capital at all, just income for past 12mths. He has been advised that cashing in stuff or taking regular withdrawals from bonds is not income such as taxed items like wages, pensions, interest. Just trying to be sure he's doing right.
  • dunstonh
    dunstonh Posts: 116,596 Forumite
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    He has been advised that cashing in stuff or taking regular withdrawals from bonds is not income such as taxed items like wages, pensions, interest.

    Its not. However, you should not mix up HMRC taxation with means testing. It is two different things.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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