Taxation charged on investment bonds (full surrender)

[RESSE]

Is the rate of tax on a chargeable gain 20%?

If the bond holder is a 40% tax payer he would still be charged tax @ 20% for the gain (i.e. simply pays tax of 20% of the ‘Gain' with no further liability, the reason being that an investment bond is deemed to have paid basic rate tax at source)?

[PurpleMoonlight]

40% tax payers pay 28% capital gains tax on profit in excess of £11,100 (current tax year).

[NatAsp]

PurpleMoonlight said:

40% tax payers pay 28% capital gains tax on profit in excess of £11,100 (current tax year).

Bonds are not subject to CGT though. The OP is correct in their assumption. Though be careful of lost allowances. For example, if the gain takes your total income for the year over 100k, you will lose all or part of your personal allowance.

[ellroy]

Op you're correct. A 40% taxpayer will have a further 20% liability on the gain, 20% deemed to have been paid by the life company within the fund.

This assumes it's an onshore bond of course. Offshore will have had no tax deducted as far as the revenue are concerned and do there would be a full 40% to pay in this case.

[RESSE]

ellroy said:

Op you're correct. A 40% taxpayer will have a further 20% liability on the gain, 20% deemed to have been paid by the life company within the fund.

This assumes it's an onshore bond of course. Offshore will have had no tax deducted as far as the revenue are concerned and do there would be a full 40% to pay in this case.

Thank you.

[Ginge R]

VG point about onshore Vs offshore. The overseas regime is important and although you can invest in a wider variety of possibilities, although your portfolio compounds up 'gross', you'll get taxed if you not only take full or partial surrender, but when there is the payment of a death claim or a transfer of ownership (assignment) 'for money or money’s worth'. So, not much good if you're aged or in a relatively predictable and linear health decline.