Making the most of your savings

[dr_john]

I tend to be very cautious, the most risky thing I have is a Prudential with profits bond. I've taken 5% pa (tax free) out of it for the last few years and the capital is gradually increasing as well. So overall I'm fairly pleased with

Just on this, you do realise that the 5% allowance which is for Chargeable Gains Tax is 5% Tax Defferred allowance and not Tax Free. So although you take 5% now and pay no tax on this, you may end up paying it when you cash it in. The 5% is accumulative and based on the initial investment(s) and can only be built up over 20 years, so if you take 5% each year for 20 years or use the whole allowance Built up anything over and above this amount is taxable when it is cashed in either in part or in full.

Basic rate tax is always paid by the company you have invested with but if your a high rate tax payer or the amount taken takes you into the higher rate tax bracket (as it is viewed as income) then you need to pay the difference between the higher and lower rates. Also with noting that although you will be given a Chargeable Gains Certificate it's up to you to declare this to HMRC and if the amount of gain is under 17k then this is not reported to HMRC by the company from which you held your investment but if it is over 17k they will tell them.

Hmm, thanks Angie. I knew that Prudential were effectively paying the tax on my behalf but you have raised other issues.

I think I need to talk to my financial adviser...

 

[Angie4m]

I tend to be very cautious, the most risky thing I have is a Prudential with profits bond. I've taken 5% pa (tax free) out of it for the last few years and the capital is gradually increasing as well. So overall I'm fairly pleased with

Just on this, you do realise that the 5% allowance which is for Chargeable Gains Tax is 5% Tax Defferred allowance and not Tax Free. So although you take 5% now and pay no tax on this, you may end up paying it when you cash it in. The 5% is accumulative and based on the initial investment(s) and can only be built up over 20 years, so if you take 5% each year for 20 years or use the whole allowance Built up anything over and above this amount is taxable when it is cashed in either in part or in full.

Basic rate tax is always paid by the company you have invested with but if your a high rate tax payer or the amount taken takes you into the higher rate tax bracket (as it is viewed as income) then you need to pay the difference between the higher and lower rates. Also with noting that although you will be given a Chargeable Gains Certificate it's up to you to declare this to HMRC and if the amount of gain is under 17k then this is not reported to HMRC by the company from which you held your investment but if it is over 17k they will tell them.

Hmm, thanks Angie. I knew that Prudential were effectively paying the tax on my behalf but you have raised other issues.

I think I need to talk to my financial adviser...

Hopefully they'll be able to advise but don't be so shocked if they can't. I see it all the time, I was involved heavily with this side of stuff at my work and still am mostly due to the fact that advisors know jack all about it and as usual I need to explain it to them. I'm now super lucky :roll: because I also get to deal with Capital Gains too! It's great for my own investments and my parents as I can work it all out and make sure they won't be stung on any changes they make but I do fear for some people out there.