Prudential Flexible Investment Plan (Bond)

atlanticspan

Hello All,
I have the above type of investment together with several OEIC's.
Could somebody advise whether there is a difference in the way these two different types of investments are taxed.
Many thanks

dunstonh

Investment bonds are taxed different to OEICs. No CGT as corporation tax is paid on growth within the fund. Although losses can lead to the funds being prepared for tax being "refunded" within the fund. Insurance companies still get tapering relief. Income on investments internally within life funds is handled much the same way as OEICs.

Personal taxation is different. Higher rate taxpayers can avoid higher rate tax through use of an investment bond by being able to defer the gains until they are basic rate taxpayers. There is a relief called top slicing relief that can aid in this. There is no CGT payable on investment bonds.

There is more but they are probably the key things.

Pecking order wise, ISA remains in front of investment bond but OEIC and investment bond are largely cost neutral for basic rate taxpayers. Historically, costs could be more beneficial on larger amounts in an investment bond but nowadays the costs are fairly neutral between them. In most cases, you would find OEIC marginally beating Bond in the pecking order unless you hit the niche areas where bond is better.

atlanticspan

dunstonh wrote: »

Investment bonds are taxed different to OEICs. No CGT as corporation tax is paid on growth within the fund. Although losses can lead to the funds being prepared for tax being "refunded" within the fund. Insurance companies still get tapering relief. Income on investments internally within life funds is handled much the same way as OEICs.

Personal taxation is different. Higher rate taxpayers can avoid higher rate tax through use of an investment bond by being able to defer the gains until they are basic rate taxpayers. There is a relief called top slicing relief that can aid in this. There is no CGT payable on investment bonds.

There is more but they are probably the key things.

Pecking order wise, ISA remains in front of investment bond but OEIC and investment bond are largely cost neutral for basic rate taxpayers. Historically, costs could be more beneficial on larger amounts in an investment bond but nowadays the costs are fairly neutral between them. In most cases, you would find OEIC marginally beating Bond in the pecking order unless you hit the niche areas where bond is better.

dunstonh Thanks so much for your fulsome reply,I'm very grateful to you.