Gift money to my Son Capital gains tax

Susan1942

My Son who already owns a house with negative equity and is renting in a different location
I am going to give him £15.000 towards a deposit and wondering how best I can do so. I would want to take some money from several bonds I have I don't take any income from these Obviously there are tax implications I know that I can take 5% without any tax but think that this is only on the origional investment I can take 5% X 2 if I have not taken anything in the previous years. Can I only take 5% from one bond or 5% from more than 1 bond without incurring CGT Also I know I can gift £3000 in any one year but can this be from a bond and if so would this be free of CGT
I don't have a lot of money and this would be a gift but I have enough to give this without hardship to myself I had a fair bit of money in a bank account but when I bought my current home I spend more than £50.000 some 15 years ago and in the past 2 years have replaced the kitchen again and the windows so this has depleted the ready cash What I now have in cash in bank account I want to keep there I am a pensioner so money I take from saving without any growth I can not put back
I had or have had a Financial Advisor but he put me in to a Standard Life with profit bond when everyone was saying don't do it He had said he would review my situation every year but he has not done so 2 Years ago I called him to say where should I take some money from and he says just whereever it matters not. I no longer want him to get any income from any investments he organised for me some years ago He sent me a copy of his new premises but I also feel that he knows I may not have any more money to invest so he has little to gain I went to him because my Daughter was a friend of his wife. I have never really been happy with how he dealt with me but due to this didn't want to change
I know I should see a new advisor How do I stop the one I have not seen for about 4 years from getting any money he may be making from investments I made some years ago?
An awful lot of questions I know I am at my Son's at the moment and they are putting an offer on the table for a house they want to buy so need money soon The live in Northern Ireland so house prices are low hence the negative equity on their own house It is rented and the rent pays the mortgage They have got an mortgage in place for the new house but need my money to fund the deposit Would appreciate any advice This forum is often my first place to ask advice Thanks for any help you can give me.

Sue

Your_Hero

Susan1942 wrote: »

My Son who already owns a house with negative equity and is renting in a different location
I am going to give him £15.000 towards a deposit and wondering how best I can do so. I would want to take some money from several bonds I have I don't take any income from these Obviously there are tax implications I know that I can take 5% without any tax but think that this is only on the origional investment I can take 5% X 2 if I have not taken anything in the previous years. Can I only take 5% from one bond or 5% from more than 1 bond without incurring CGT.

If it is an Investment Bond, then 5% withdrawal is for each bond you own (by bond I mean separate policies) and for the original capital only. There is a deferred income facility where your 5% rolls up if you have not withdrawn any income previously and if your withdrawal amount is equal or below this, then there is no immediate tax to pay as this is deemed a return of capital.

Also the gains in the bond are not assessed under CGT but rather it is income tax. You do not need to pay any income tax if the amount is within the 5% income withdrawal (accumulated) and partially surrender across all segments.

Alternatively it may be better for you to cash in full units as this may minimise the tax charged. The gains will be added to your income for the year (they carry a 20% tax credit already), and if basic rate payer then no tax due, but if HRT then an additional 20% is payable although top slicing relief is available.

Also I know I can gift £3000 in any one year but can this be from a bond and if so would this be free of CGT

The £3,000 gift allowance is not related to CGT, it is IHT (inheritance tax). See above, as the proceeds of the bond are taxed as income.

I have never really been happy with how he dealt with me but due to this didn't want to change
I know I should see a new advisor How do I stop the one I have not seen for about 4 years from getting any money he may be making from investments I made some years ago?

It depends what your agreement is but most likely as it is pre-RDR, it is on a commission basis. You can probably contact Standard Life yourself and tell them you are not using him as a financial adviser any more and to cease paying him the trail commission.

Alternatively you can find another adviser who is willing to look after you and if he feels the investment bond is still suitable for you, he can take over the plan and receive the ongoing commission instead. Depending on amounts involved, this is likely to be a small amount and may not be enough to remunerate the adviser for ongoing advice and he may charge you more if you want to use him/her.

Susan1942

Thank you so much for the excellent information I am just home so have not looked at the forum since I wrote
I have got investments bonds with 3 different companies and also have a stock and shares ISA with Standard Life I also obviously have money in a cash ISA as well as Santander who are paying 3% interest on current accounts up to £20,000
The Standard life with profit bond I got rid of some years ago
I have taken a couple of times some cash from an AXA bond which I have had for more than 20 years It has performed well and any money I have taken out has grown back to well over what the origional investment was. The Scottish Mutual I have taken some 10+ years ago and it has performed well and I have never taken anything from it The 3rd bond lost a lot of money in the first couple of years and I was tempted to take the money out but would have lost more than £15 000 had I done so I spoke to my Bank Manager and he said sit tight This has now recovered and while it has not done as well as the Scottish Mutual it is above the origional investment My dilemma is do I take a bit from each again nothing taken from this bond 5% from each bond would more than give me what I need and I realise that the S&S Isa is doing well at the moment I had not realised that I could take 5% from each bond maybe only from one Not sure if I should take it from the one that has recovered or not Your suggestion that perhaps I should cash in a bigger segment from one source if that is how I understand what you have said
I intend to contact the different companies that I have bonds with and ask them to remove this Financial Advisor as I do not want him to receive any further monies from my investments
From what you say I do not have a problem and can easily take £15.000 without any penalty if my understanding is correct. This money along with what he already has will cover the deposit he requires I don't really want to give him any more than this as I have been continually over the years given money If I give this £3000 does that have to come from cash savings if my understanding is correct Stocks and Shares ISA has not tax payable
Thank you so much you have given me a lot of food for thought and you have helped me towards making an informed decision
Thanks again Sue

Susan1942

I have checked out the value of my bonds today and they are pretty healthy at the moment I am told that I can take 5% for each year I have held them one is 13 years and another 9 years I did nnot realise that I could take 5% of the capital and for the whole term of the bond as I have never taken any income or cashed in part of them I could take it all from one but may take it from 2 One which I am unsure about as it lost about 33% in the first couple of years as there was property tied up in it Have had this for 9 years Since then it has recovered and is now beyond the origional investment and still growing It is still below the value of another bond taken out 13 years ago is about £12,000 higher but I am wondering if I will split the money I want to access or if I should take it all from the one which is less although in the long term has recovered There is enough money in each bond to allow me to take the total amount from one bond Another bond which I have taken money from over the years I think I am going to leave alone and also as my Stocks and Shares Isa is doing well. I do feel a lot clearer I just need to decide how much money I will take from the first 2 bonds I have mentioned.
Thank you so much for the information which has directed me in the right direction It was explained to me that if I take more than 5% that I would only pay tax if it took me into a higher tax banding . That is if my understanding is correct. Thanks again Sue

Your_Hero

Susan1942 wrote: »

Thank you so much for the information which has directed me in the right direction It was explained to me that if I take more than 5% that I would only pay tax if it took me into a higher tax banding . That is if my understanding is correct. Thanks again Sue

That's correct. The excess over 5% is treated as income for the year. The amount within the [accumulated] 5% is deemed as a return of your original capital so no tax is due.

Susan1942

Thanks for that and for clearing that up for me i had thought that I might incur a £3000 tax liability for the £15 000 so very happy to know that this is not the case

Sue

Susan1942

Crisis diverted My Son put in a bid for a house at £4000 under on an offers around and they turned it down The house has been on the market for more than a year They were advised to accept and my Son left it on the table from last Wednesday until this coming Wednesday He decided that he was not going to offer any more so told the Agent this am that he is no longer interested Foolish people but for now I can keep MY money where it is
I am very grateful for the advice I had from yourselves and for confirming all this with the Companies where I have money invested and there were no tax liability whatsoever It is useful to know as no doubt sometime in the not too distant future they will find another house For now they are going to remain in the house they are renting 5 bed detached large house paying just £650 month rent Their own house is a large 2 public rooms 4 bed 4 bathroom house and rent on it is £550 but this covers the mortgage Hopefully things may pick up but again many thanks
Sue