Higher tax will not see the end of bonds

Investment bonds

Even if the 5% withdrawal facility is removed, investment bonds - which already face higher taxation - will still offer a number of advantages and should not disappear

The tax regime applicable to UK investment bonds has been with us for many years and most people are more than familiar with concepts such as 5% withdrawals, top slicing and chargeable gains. However there have been a few changes recently, with the Finance Act 2003 introducing changes to the tax paid in life assurance company funds meaning that income and capital gains are taxable at 20%, though UK dividend income is excluded. Since 6 April 2004, there has been a further 20% tax to pay on the chargeable gain if you are a higher-rate taxpayer. This was previously 18%. Many people have su...