The information below is only relevant if the bond is owned by an individual(s). If you set up the bond under Trust, or if the bond is owned by a company, you should speak your financial adviser for specific tax details.
There is no basic-rate Income Tax or Capital Gains Tax on proceeds. If you are a higher-rate taxpayer, or become one because of the increase in the value of your bond, you will have to pay tax on a 'chargeable gain'.
A chargeable gain is generally the amount by which the value of a policy exceeds the amount paid into it. Chargeable gains can also arise when the amount withdrawn from certain policies exceed certain allowances. The rate for a chargeable gain will not be more than the difference between the lower and higher rates of Income Tax. Standard Life pays tax on investment returns at the rates applicable to life assurance companies.
You can withdraw up to 5% of the total payments made into your bond without any immediate tax liability each year (this includes any 'income' distributions you take) until the total you have withdrawn equals your original investment. Once you have made withdrawals totalling 100% of the total amounts paid into your bond, this allowance stops. Any part of this allowance that you don't use can be carried forward into future tax years until you have used up your allowance. You must keep at least £300 invested in your bond if you wish it to remain open.
If you take regular withdrawals amounting in any policy year to more than 5% of the total amounts paid into your bond, part of your benefit may be treated as a chargeable gain. You may also have a chargeable gain if you cash in all or part of your bond. Chargeable gains are normally assessed on the bond owner.
If you are a couple paying different rates of tax, it may be more tax efficient for the partner with the lower tax rate to own the bond. You should seek financial advice if you require further information.There is no tax to pay for switching funds.
These may be reduced if there is a gain for Income Tax purposes, but will not fall below your personal allowance.
Any Inheritance Tax to be paid if you die during the term will depend on how your bond was set up and on your individual circumstances.
Tax and legislation are likely to change. The information given here is based on our understanding of law and HM Revenue & Customs practice at today's date.
Please refer to the Key Features Document for full details on Tax.
