News & Blog

It’s often said by professional in all walks of life – from accountants & solicitors to doctors and even plumbers & electricians – that a little knowledge can be a dangerous thing. This phrase was never more apparent than with a recent case which came across my desk.

Mrs A had an investment bond which she had invested in over 20 years ago and had never had occasion to touch. She now wished to cash in the bond and give the sum to her children.

Cashing in the bond would produce a Chargeable Event Gain (CEG) of about £100,000 but as Mrs A was a basic rate tax payer, and the sum had accumulated over 20 years, she believed that no tax would be payable on the CEG. Hence she thought that she could cash in the bond “tax-free” and then give the entire proceeds to her children. The bond was duly cashed, the proceeds given away and Mrs A passed me the CEG certificate along with the other details for her tax return.

This is where things take a turn for the worse ….

Unfortunately, Mrs A missed a vital piece of additional tax law which directly affected how the calculations should have been carried out. The result is that Mrs A now has an unexpected tax bill of about £24,000. This could have been safely avoided if she had taken professional advice and cashed in the bond in two halves over two different tax years.

The moral of this story is, of course, before leaping into an important financial decision always take advice from the qualified professionals. Here at Thomas Westcott we have fully qualified and highly experienced advisors in all aspects of tax and financial planning – so call us before you leap!