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Taxation of a with-profit fund

I wonder if anyone knows anything about this...

Mum (now in a care home) put 10k into a Norwich Union WP fund (now called a GA Investment Bond) in 1993.

The cash-in value is now 33k. Bond Value is 28k.

On the face of it there is 23k taxable gain, which I don't (I am a POA for her) want to do; I want to keep it down to 10k in the current tax year.

So I could cash in slightly under 50% of it and that would definitely be OK, presumably.

But isn't there some sort of "indexation" involved?

If it was unit-linked it would be obvious...

I'd appreciate any pointers and then if necessary I will get proper advice on it.

I don't *need* to cash it in but it seems a good idea to crystallise capital gains. Also I am under pressure from my sister (also a POA for Mum) to cash it because she is into all sorts of spiritual stuff and is certain the stock market is about to crash! (not kidding).

Reply to
Postman Pat
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I suggest you first check if this is a standard "with profits" life insurance policy. If so you may well be worrying needlessly as the "gain", while taxable as income, is often treated as having tax at the basic rate already paid so there's no net liability unless she is a higher rate taxpayer. Lots of details on that readily available - eg

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or or if you want more

Reply to
Robin

See:

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As she has held the bond for nearly twenty years, a top-slicing calculation would be around £1,200. This is the figure added to her income for tax p urposes. If this does not push her into the higher-rate band, there will be no further tax to pay (as WP Bonds are taxed internally at 20% - only high er rate taxpayers have to pay another 20%).

However, the whole gain is taken into account for age allowance purposes, s o it could wipe out her age allowance if it is encashed. But it may be a pr ice worth paying. That is for you to decide.

Neil.

Reply to
N. Sloane

"N. Sloane" wrote

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would be around £1,200. This is the figure added to her income for tax purposes. If this does not push her into the higher-rate band, there will be no further tax to pay (as WP Bonds are taxed internally at 20% - only higher rate taxpayers have to pay another 20%).

could wipe out her age allowance if it is encashed. But it may be a price worth paying. That is for you to decide.

That's really interesting, Neil - many thanks.

Age allowance is only a few hundred quid a year, AFAICT, so the price

*must* be worth paying.
Reply to
Postman Pat

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