How Are guaranteed income bonds Taxed?

• The returns from this investment are paid net of the savings rate of tax, 20%.  If you pay tax at the basic or lower rate, you have no further tax to pay on your investment, unless the income pushes you into the higher rate of tax bracket.
  
  
• Any income in excess of 5% of the investment must be added to your other income for that tax year to decide if you are still a basic rate tax payer.
  
  
• Should you be liable to tax at higher rates, the gain on each policy may be liable to additional tax on maturity or on distribution of income.
  
  
• Income or growth provided by guaranteed bonds is not subject to capital gains tax, but is instead subject to income tax on profits in excess of the initial capital invested.
  
  
• Entitlements to Age Allowance may be affected by any taxable gains arising from regular, surrender or maturity payments.
  
  
• Tax cannot be reclaimed by lower rate or non taxpayers because income and growth payments are paid from an insurance fund and basic rate and capital gains tax are deemed to have been paid and cannot be reclaimed.
  
  
• If you die before the end of the chosen investment term some tax may be payable.

It is important to remember that, just like an Investment Bond, a Guaranteed Bond is a life assurance contract. As such, to find out in more detail about the taxation of life assurance contracts, please contact us.