Investment income projection

cheerfulcat

Hello, oceanblue, dunstonh,

Thank you both very much for your comments. I think that I will keep the Skandia product until I can cash it in without penalty fees. I have come to the conclusion, having read your various posts, that investment bonds may well be suitable for some, but that the Skandia one is rather too expensive.

Bearing in mind what has been posted on this thread, and from your past comments regarding your SIPP (which prompted me to re-evaluate my own strategy for using collective funds rather than individual equities!), I'm surprised you opted for an Investment Bond

I'm glad to know that I have given you something to think about :-). I am a great fan of direct investing. I didn't so much opt for the investment; I was sort of pushed into it by an IFA at a time of crisis.

May I say that the IFAs here have restored my faith a little - I wish that the ones I meet in real life were as helpful.

Cheerfulcat

MJSW

Now then, show me where I have said that those dividends themselves would suffer additional tax.

I'm confused! You haven't said that, and I haven't claimed that you've ever said that!

oceanblue wrote:

You see, we agree on this: explicit income in excess of the income limit increases the tax burden.

Yes, we do agree on this. What I'm trying to establish is whether we now agree on how much this extra tax burden is. At the end of the day, that is what the prospective investor will be concerned about. This is the intention of my previous 3 or 4 questions, which you haven't really answered, probably because of confusion over all the differing terms that have been flying about in this discussion. Neither of us really knows which the other one is trying to refer to, eg 'effective' rate, 'equivilent' rate, 'actual' rate, 'marginal' rate etc.

I'll try and make it absolutely clear what I'm trying to ask you, which is this:

How much additional tax would a basic rate investor pay (as a percentage of the dividend income) as a result of receiving dividends which raise his income above the Age Allowance threshold? (For the avoidance of doubt, I'm not interested in whether this is deemed to increase the tax on his pension income, the tax on his dividend income or indeed on any other sort of income - I'm just asking about the increase in the investor's total tax liability).

oceanblue_3

Hello MJSW

Sorry for the delay in replying, but I have just returned from a whistle-stop lecture tour, the principal objective of which was to disseminate to the Chartered Accountant / Chartered Tax Adviser community the ramifications of their clients receiving dividend income as opposed to making withdrawals from an investment bond.
The tour was an unmitigated success, particularly when I related to my listeners the details of our discussions on this thread. They agreed that the world of tax was dark and dreary, and that a certain precioussssness had been known to overwhelm some of their number. Nevertheless, the general consensus was that a visit to this website http://en.wikipedia.org/wiki/Anal_retentive would prove illuminating to all concerned.

With reference to the other thing, the answer is 11%