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Where Taxpayers and Advisers Meet

Please help! Tax on With Profits Fund??

Joined:Mon Dec 02, 2019 7:39 pm
Please help! Tax on With Profits Fund??

Postby JenB3102 » Mon Dec 02, 2019 7:58 pm

Hi there, really hoping you can help as I'm starting to panic a bit. I'm sole deputy and executor for my elderly dad's estate (he's 89). He's in care now and I'm trying my best to make sense of things as I need to report back to the court of protection and do my best to manage his affairs. I've found a savings account that seems to be an investment known as a 'with profits fund' with a major bank. It has a cash in value of around £40,000 or a death benefit around the same. The account documentation suggests it can be cashed in at any time and "you may have to pay income tax". I'm trying my best to consolidate things as his finances are a bit of a mess. He earns around £20,000 per year in pensions and has no other income. I'd like to just cash this in and put the money in a normal account for him. What would the tax implications be of cashing this in? Or should I just leave it alone? Sorry, I'm getting a bit flustered with all this.

Thank you so much!


Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Please help! Tax on With Profits Fund??

Postby pawncob » Tue Dec 03, 2019 12:30 pm

This might help

and this will illustrate why it's complicated.
With a pinch of salt take what I say, but don't exceed your RDA

Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire

Re: Please help! Tax on With Profits Fund??

Postby jerome.lane » Tue Dec 03, 2019 4:39 pm

With a cash in value of £40k and income of £20k, it can almost be assumed that there won't be massive tax issues if you did cash it in. Some older "with profits" funds can be tax efficient especially if held for full term and even have guarantees so its worth checking the performance rather than cashing it in and leaving it earning little to no interest in a bank account. It would also be worth getting his estate reviewed so your fully aware of the available funds for long term care etc.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

Joined:Mon Dec 02, 2019 7:39 pm

Re: Please help! Tax on With Profits Fund??

Postby JenB3102 » Wed Dec 04, 2019 12:59 pm

Thank you both so much, that puts my mind at rest a lot. I'll have a read of those docs. He has continuing healthcare due to his poor health (Parkinsons among other things) so hopefully the care costs shouldn't get too out of control but there's lots of other stuff I need to sort. I'm leaning towards cashing it in for him as it's one less thing to worry about but I'll have a read through those docs first.

Thanks again! Jen

Joined:Tue Feb 27, 2018 8:34 pm

Re: Please help! Tax on With Profits Fund??

Postby ben_power » Fri Mar 27, 2020 12:31 am

Sorry, I appreciate this is an older post but thought I would reply just in case.

With profits fund is a type of investment as should not be confused with the wrapper it is held in. AS such, the taxation depends on what the WP fund is held within. Typical wrappers for WP funds include endowments, ISAs, General Investment Accounts and Investment Bonds (amongst others), each are tax differently. Without knowing exactly what your father holds nobody can ascertain the tax implications. For example, whilst there may be no tax implications for cashing it in, Investment Bonds fall outside the scope of long term care costs when valuing estates and by selling it would put the £40,00 back into the hands of a local authority.

Be careful taking snippets of information, seek professional advice.

Joined:Wed Aug 06, 2008 3:25 pm

Re: Please help! Tax on With Profits Fund??

Postby maths » Fri Mar 27, 2020 12:51 am

If I may say ben_power's comments make a lot of sense.

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