Tax treatment of investment bond

pmj1802

An investment bond was set up in my name by a relative in 2004. £24k invested now worth approx £ 35k. I understand that you can withdraw 5% annually and this can be carried forward in theory i am close to 100% withdrawal (2024 is 20 years) so does that mean that I can withdraw the £35k tax free or just the original £24k what is the tax treatment if I withdraw all 

Doctor_Who

My understanding is that the 5% per year applies to the original investment sum.

More info here on investment bonds and taxation:

https://techzone.abrdn.com/public/investment/Taxation-of-bonds#:~:text=Individuals do not pay tax,tax year of that event.

Linton

Assuming a standard onshore investment bond, you can withdraw the initial investment tax free.  The gains are taxed under income tax (not CGT)  in the year you withdraw them:

1) Basic rate Tax on the gains is assumed to have been paid by the investment bond manager.
2) If your total income after the gain is in the same tax band as without the gain you pay at the appropriate marginal tax rate minus the basic rate assumed to have been paid,
3) if the gain puts you in a higher rate tax band life gets a bit more complicated with the application of "top slicing".  I wont explain unless this applies to youI

Shedman

And the gain is regarded as Savings Income / Interest for tax purposes so if you have any of £1000 (or £500 if HR tax payer) Personal Savings Allowance remaining taxed at 0% that would be used first and hence would reduce the tax charge on the gain