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Where Taxpayers and Advisers Meet

cashing in peps and isas

lucienne
Posts:13
Joined:Wed Aug 06, 2008 4:08 pm

Postby lucienne » Sun Jul 27, 2008 12:40 pm

is it correct that there is not cgt on encashment of these kinds of investments. i am asking because trying to cobble cash together so that can put cash into discounted gift trust as IHT avoidance strategy. if yes does this mean really doesnt matter how much has grown since starting.

bob.fraser@towrylaw.
Posts:765
Joined:Wed Aug 06, 2008 3:14 pm

Postby bob.fraser@towrylaw. » Sun Jul 27, 2008 11:18 pm

Yes, there is NO CGT on the encashment of PEP/ISA irrespective of the amount of growth.
I hope that, in respect of your IHT strategy, you are gettng your advice from a properly qualified financial planner who is charging you a fee, rather than commission. Have a look at the Institute of Financial Planning website to see the questions you should be asking your advisor.

Bob Fraser
Chartered Financial Planner

lucienne
Posts:13
Joined:Wed Aug 06, 2008 4:08 pm

Postby lucienne » Mon Jul 28, 2008 6:31 am

thnk you very much for that.would there be any income tax to pay on it. would it be treated as income for income tax purposes although it would be destined for a trust. am consulting advisors but just working out which assets are readily converted into cash for this purpose.



thanks

bob.fraser@towrylaw.
Posts:765
Joined:Wed Aug 06, 2008 3:14 pm

Postby bob.fraser@towrylaw. » Mon Jul 28, 2008 7:45 am

The growth in value of the PEP/ISA is taxed as capital gains, but are exempt.
Income tax may be chargeable depending on how the underlying funds are invested. Funds that are invested in assets that provide "interest", such as corporate bond funds, are tax free. There is no income tax. Funds that are invested in assets that provide "dividends" that are taxed at source, such as UK equity funds, are not taxed in the PEP/ISA but the 10% tax credit cannot be reclaimed. So technically these are no tax free, and income tax has been paid. However, there is no higher rate liability. This was just dear Gordon raiding PEPs/ISAs in exactly the same way he raided the pension funds.

Your advisors should be able to explain this to you, and should be helping you allocate your assets to the IHT solution.

Bob Fraser
Chartered Financial Planner

lucienne
Posts:13
Joined:Wed Aug 06, 2008 4:08 pm

Postby lucienne » Mon Jul 28, 2008 10:59 am

If i understand you then there will be no income tax to be paid on encashment. was just curious as wondered why you would go to the bother of doing this to avoid IHT at 40% if income tax going to be levied anyway.

thank you for your answers.

out of interest what is the etiquette of seeking a second opinion on matters such as these. family advisors over period of years but would very much like a second opinion in terms of opinion even if execution conducted by advisors.

thanks


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