Offshore Bond Tech Info

Question 1

Offshore bond
No tax inside fund
Inc tax only

Answer 1

5% withdrawals
Tax deferred for up to 20 years
5 x £55k=£2750 x 5 =£13750
Enough to cover Harry yr 1 and 3rd year 2 but not enough for when Emma joins

Encashment 
Full or partial 
Tax to pay 
Simon -£403 of £500 PSA remaining 
HRT on remainder 40%

Grace £597 of £1000PSA remaining
BRT 20% on remainder. If goes into HRT she can use top slicing relief but her PSA will drop to £500.

Full or partial surrender
-Partial uses 5% Withdrawals so has 5% of original value x policy year tax deferred and gain is subject to income tax end policy year

I.e &100k cost, £110k surrender, 10 policies,

5%=5k x 4 policy year =£20 tax deferred-but 30k withdrawal so £10k gain

£10k liable income tax end yr

Full surrenders entire policies within the bond
-surrender -minus original cost =£10k over £20k
11k per policy (110/10) minus £10k gain =£1k gain subject to immediate income tax.

Assignment to Grace
Save tax from HR to BR
Funds Must be seen to be coming from her alone i’e permanent
Exempt IHT if seen to be covering living costs/tutition fees and not permanent
Use PSA and BR band

Assignment to Kids
Assign segments to kids
Use PA, PSA £1000 and SRB £5000 so £18500 each tax free each year.
Doesn’t count iht if covering living costs
Even if they work, unliked to earn enough cover tax.