Tax implication on investment bond surrender

Linton

Bobziz said:

Thank you Linton, much appreciated.

Linton said: Is there any danger she will exceed the higher rate band?

amount invested £21k, current value £79k, amount withdrawn £13k, so gain currently £71k + £20k pension + £ 37k savings interest= £128k, so yes she will exceed the higher rate. 

£54k of savings interest sounds an enormous figure. Are you sure it is right? Aren’t those savings taxable each year?

As above savings will be £37k and will be taxable. Her finances are managed via POA. Sounds like her savings should have been invested in a savings bond with a lower interest rate such that she would have stayed below the higher rate band.

Since her income before accounting for the bond withdrawal is well below the additional tax band top-slicing ahould should ensure she is only liable for higher rate tax.

Bobziz

dunstonh said:

Thanks Dunstonh. I suspect the assignment or gifting options may fall foul of the POA requirements re acting in her best interest?

Is money exchange a possibility if funds are available?  e.g. assign the bond and pay the cash equivalent back.

Does the  bond really need to be surrendered?  - leaving it until death may be simpler.

An exchange may be possible 🤔 thanks.

No we weren't intending to surrender before death, but it pays out automatically at death with the associated tax implications, i.e. an additional 20% on >the HRT band.

Mothman

Bobziz said:

dunstonh said:

Thanks Dunstonh. I suspect the assignment or gifting options may fall foul of the POA requirements re acting in her best interest?

Is money exchange a possibility if funds are available?  e.g. assign the bond and pay the cash equivalent back.

Does the  bond really need to be surrendered?  - leaving it until death may be simpler.

An exchange may be possible 🤔 thanks.

No we weren't intending to surrender before death, but it pays out automatically at death with the associated tax implications, i.e. an additional 20% on >the HRT band.

Remember it will depend on when she dies in tax year, i.e. if she were to die early in the tax year she may not have had enough income to reach the HRT band. Appreciate there is no way to plan for this though.