Variable Investment Bond Maturing 14 March at 10:06AM in Savings & investments 5 replies 122 views

NewLibra

Hello

Hope this is the right board for this! My husband has a Variable Investment Bond that matures at the end of this month, he is insisting that no tax will need to be paid on it, I am highly dubious of that but my research on the internet has made things no clearer for me! Can anyone help with this simple question (well two questions)
1) Will tax need to be paid?
2) Does tax only need to be paid on the profit from the bond, so not the initial investment?

Thank you (and if this is the wrong board which do you suggest I post it in?)

Helen

dunstonh

1) Will tax need to be paid?

It is unclear what product you have. Investment bonds can be onshore or offshore.    Do you know which your is?
Also the title name of variable is a marketing name rather than a product name.   Its not a name I have come across.

The reference to maturity suggests it is a single premium endowment.   These are normally qualifying policies with no future tax to pay unless there have been top ups.    Most investment bonds are whole of life (i.e. open ended) and don't mature.

So, rather than give a range of potential tax scenarios which may not apply, can you give any further information about this investment bond?

NewLibra

Thanks for your reply, I will see what else I can dig out but it was a 20 year investment bond that is coming to maturity which we paid a fixed amount into monthly (but he got it before I turned up on the scene), I think it is onshore. It's an old standard life policy. 

Linton

Assuming it is a standard on shore investment bond and no money has been withdrawn in the meantime beyond the annual 5% of initial permitted, then the total gains made over the 20 years will be taxed as income in the current tax year.  However this will only be the higher rate component as basic rate tax is deemed to have been paid by the bond manager.

It gets more complicated if the gains take your husband from one tax band to a higher one and it may turn out that the higher rate tax can be disregarded.  But it is not worth explaining until we know more about the bond and you can let us know the size of the gain and your husband's tax position.

dunstonh

However, if it is a single premium qualifying endowment (the generic name an investment bond with a fixed maturity date) then there would be no further tax to pay.     There were some providers that had single premium non-qualifying endowments.

The most common type of investment bond is a single premium, whole of life assurance (the type that Linton is referring to).

If tax is going to be an issue, then assigning to additional people may help (e.g. a spouse who may be a lower taxpayer or single to joint to use both allowances) 

NewLibra

Hello. My husband is a higher tax payer and doing the maths of how much we have put in over 20 years and how much extra on top of that we are getting back I'd say it's around the £10K mark.