Financial Services > Investments > Tax on Investments > Tax Guide - Investment Bonds

Tax Guide - Investment Bonds

Investment bonds are non-qualifying policies. This means that when the bond is encashed (or partly encashed) - there may be a tax liability.

It is possible to withdraw up to 5% of the original investment (not the current market value) of the bond each year for up to 20 years without incurring a tax liability.

However, if more than 5% is withdrawn in a year, a chargeable event bold may occur - if this happens the provider will usually issue a certificate for your tax return.

When the bond is fully encashed, a chargeable event will occur but it may not always be that there is tax to be paid, depending on the circumstances. This will be determined by your taxable income for that tax year, whether withdrawals have been taken form the policy and whether the policy is owned on a single or joint life basis, or with someone else as the beneficiary.

 

The rules are not straightforward and it is good idea to seek help from a financial adviser. If you'd like more information on this issue, please complete our Quick Enquiry Form and we will arrange for someone to contact you.

Overseas bonds however aren't subject to tax on income and gains underlying investment - a big sweetener, especially for higher rate tax payers. Almost all offshore bond funds nevertheless will be subject to a small withholding tax, which is usually culled from the dividends or interest made by the fund. Bear in mind that when you come to realize the bond's investment, tax regimes of different countries do vary, so some advance planning here would be very prudent, especially if the sums are significant.

www.Investments.co.uk is the definitive guide to making the most of your money. You can also visit us at www.pensions.co.uk to help you plan a financially secure retirement.

 

UK Investments - Financial, Property & Other Investments - 1998-2008

Investments Newsletter

Investments Newsletter