Investment Bonds contain an element of Life Assurance and should be considered as ‘tax-paid’ investments, as they are deemed to have Basic Rates of tax deducted at source throughout the life of the investment. Investment Bonds are subject to Income Tax, as opposed to Capital Gains Tax (CGT), and so fund switching within the plan does not create any additional liability.
Such plans can be advantageous for the following reasons:
If there is more than one life assured on the plan, the plan can continue despite the death of a policy holder.
- If you are a Higher rate taxpayer but envisage being a basic rate taxpayer at the time of surrender, as there should be no further tax to pay at that point.
- If you already have sufficient assets subject to CGT and do not wish to create any additional complications or tax liabilities due to fund switching and the ongoing management of your portfolio.
- You are permitted to draw up to 5% cumulative per annum from the bond, which could help provide a tax-efficient ‘income’
- Trusts are liable at the highest rates of Income Tax and CGT, with reduced annual allowances. As all tax liabilities are wrapped up within the bond, it is able to minimise any ongoing tax liabilities and additional costs submitting tax returns.
To discuss this further, please contact us.