Tax on With Profits Bond cash in.
Posted: March 3rd, 2020, 10:28 am
Mum has quite a few "Life With Profits Fund" Bonds from the 1990s.
For the last 12 or so years she has taken up to 5% of the original sum invested as income, however care needs are changing so I was looking at cashing in some of them this tax year and some next. The bonds are in many small polices, so (eg) one of them per £750 original unit invested the current value is £3k, but she has taken £500 income from each one meaning a Gain per unit of £2750. I figured I could cash in 2 units this month to use some of this years CGT allowance and then more next tax year if/when required
Mum is a non tax payer, her sole taxable income is her State pension circa £7k pa.
My confusion is that the Chargeable Event seems to be based on the date the bond started, not the tax year.. Here
https://www.pruadviser.co.uk/knowledge- ... nt-bonds/#
it says the gain arises at the end of the "Insurance Year", which suggests to me that even if I take money this month, the gain doesn't arise until the anniversary of the bond being taken out, which is December, so cashing in now doesn't use this years CGT allowance?
As some were started in October, December, Feb, and some in June, then cashing any in this month would not use her 19/20 CGT allowance, however ifif we were to surrender a unit in July.... one that was started in Oct would create a Gain in Oct 2020, however one started in June would mean the Gain does not arise until June 2021, falling in the 21/22 tax year CGT allowance.
This does seem a bit odd to me, but am I correct here?
thanks
Paul
For the last 12 or so years she has taken up to 5% of the original sum invested as income, however care needs are changing so I was looking at cashing in some of them this tax year and some next. The bonds are in many small polices, so (eg) one of them per £750 original unit invested the current value is £3k, but she has taken £500 income from each one meaning a Gain per unit of £2750. I figured I could cash in 2 units this month to use some of this years CGT allowance and then more next tax year if/when required
Mum is a non tax payer, her sole taxable income is her State pension circa £7k pa.
My confusion is that the Chargeable Event seems to be based on the date the bond started, not the tax year.. Here
https://www.pruadviser.co.uk/knowledge- ... nt-bonds/#
it says the gain arises at the end of the "Insurance Year", which suggests to me that even if I take money this month, the gain doesn't arise until the anniversary of the bond being taken out, which is December, so cashing in now doesn't use this years CGT allowance?
As some were started in October, December, Feb, and some in June, then cashing any in this month would not use her 19/20 CGT allowance, however ifif we were to surrender a unit in July.... one that was started in Oct would create a Gain in Oct 2020, however one started in June would mean the Gain does not arise until June 2021, falling in the 21/22 tax year CGT allowance.
This does seem a bit odd to me, but am I correct here?
thanks
Paul