This section applies only if the bond is owned by an individual or individuals resident for tax purposes in the UK. If the bond is set up under trust, or owned by a company or partnership, please refer to your financial adviser for more information.
Standard Life pays tax on the income and any gains of the fund(s) investments. This means that if you are a non taxpayer or a basic-rate taxpayer, you will normally have no additional tax to pay on the proceeds of the bond. If you are a higher-rate taxpayer, or become one because of any 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 Chargeable gains can also arise when the amount withdrawn from certain policies exceed certain allowances. However, the rate for this will not be more than the difference between basic and higher rates of Income tax. Standard Life pays tax on investment returns at the rates applicable to life assurance companies.
You can take tax deferred withdrawals each year of up to 5% of the total payments made into your bond, up to a maximum of 100% of the total amount paid into the bond. If you do not use your allowance in a particular policy year, you can carry it forward to a future year.
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 current understanding of law and HM Revenue & Customs practice.
Please refer to the Key Features Document (CIB17) for full details on Tax.
