CHARGABLE EVENT CERTIFICATE ON DEATH - DO I OWE THIS?!

JAM0915

So I’m sorting out my deceased father’s estate, and he had a life assurance bond. I’ve today received a letter from the company stating it is part of my father’s income for the year of death (2023). It states the number of years, gain amount of around 100k, tax treated as paid of 20k. 

It says I must declare this to the tax office? Do I owe this tax? Does this come off the 100k which is due to us? 

How does this work?
thank you for the help 

Keep_pedalling

You don’t owe it but the estate probable does. If the insurance company deducted the basic rate you may still owe some at the higher rate. 

JAM0915

How is this worked out? It says a tax return needs doing - for me or my dad? 

Daniel54

The tax return is for your late father’s affairs up until date of death.Any returns required after that date are for the estate only - I am sorry for your loss

I have recently submitted /agreed a final tax return for my late aunt 2022/2023.This included the accounting of an onshore insurance bond for a value of £115,000

The accountants have calculated more  top slicing relief than I expected

To finalise your father’s tax affairs it may be worth paying a professional accountancy firm to wrap everything up,including the accounting of the bond..

JAM0915

@Daniel54 thank you so much for the kind response! 

Sorry to be daft but when the tax return is completed for my father is it likely that there will be an additional 40/45% tax due on the 100k? 

Will the amount we receive be the 80k or 100k? 

I appreciate your help so much, thank you

Keep_pedalling

I think you need the advice of an accountant, these bonds are complex products and there are several flavours of them. 

Mothman

I think with many investment bonds you are deemed to have cashed them in the day before you die so getting some professional advice regarding the income tax situation will definitely be worth it.

Daniel54

JAM0915 said:

@Daniel54 thank you so much for the kind response! 

Sorry to be daft but when the tax return is completed for my father is it likely that there will be an additional 40/45% tax due on the 100k? 

Will the amount we receive be the 80k or 100k? 

I appreciate your help so much, thank you

As others have subsequently said ,the tax treatment of these bonds can be complex and I would reiterate the recommendation of professional tax advice

Just for your information,in  my case we had a £65k increase in value ( without any withdrawals) but this increase was spread over the the 23 year life of the bond and no tax was due in the final year when the bond was encashed for the value as at date of death..

Without knowing the details I would hazard a guess that the tax charge on the bond,if anything,might be less than you fear.But only suitably qualified advice can tie this down for you

I should add that the 20% tax has almost certainly been taken into account when advising you of the value of the bond,as the tax is treated as having been paid within the bond.