Tax on surrendering investment bonds (basic taxpayer)

I_want_to_break_free

Its that time of the year again when I complete my and my OH tax return and I have a query hence this post.

In the 2018/9 tax year my OH surrendered investment bonds. The bonds were on shore and held for 13 years. They generated a gain of £26,883 (i.e. surrender value minus initial investment). The top slice gain was £2,068 (£26,883 divided by 13). £2,068 added to income for the year means OH remains a basic rate taxpayer. So, does this mean OH has no tax liability on the £26,883 or have I misunderstood?


Thanks.

Dazed_and_confused

Do you have a chargeable event certificate?

If the gain has had (notional) tax deducted and no additional tax is due then it can actually mean there is less tax to pay overall or a refund becomes due.

Complete the return without the gain* and check the tax due/overpaid. Then add the gain and see how that impacts the overall tax due/overpaid.

*don't file it with HMRC though!

I_want_to_break_free

Hi Dazed and Confused,


Thanks for your post. Yes, a chargeable event certificate has been issued and I have it. This has "Income Tax....Treated as paid Y" and "Amount of tax treated as paid rounded up £5,377". I'll update OH tax return without and then with the gain to see if / how that impacts the tax liability.



In theory if a gain from a surrender of on shore bonds keeps someone in / below the basic rate tax band does the that increase their tax liability all else being equal? Or is this more complex with other variables coming into play?

Dazed_and_confused

In the circumstances you describe I think it is unlikely to increase their liability.

Far more likely to reduce their liability. Depending on what savings interest they have in the year potentially by upto £200. Could even be more but that would depend on how much taxable pension/salary/self employment income etc they have.