the higher rate band, then a further 18% is payable on that amount multiplied by the number of years.

Higher rate taxpayers

These will have to pay the extra 18% tax, but not until maturity, the advantage of the deferred tax being that the fund grows with only standard rate tax having been deducted.

These are pooled investments in the funds of life assurance companies. As the investment is frequently unitised, they are in effect the life assurance equivalent of unit trusts. (Conventional or traditional insurance bonds are not unitised but have become increasingly unpopular with providers as they are less easily explained.)

There are usually separate funds for equities, fixed interest and property. Often some of these categories are divided into UK and international investments.

There is usually a minimum investment period (often five years) with penalties for earlier termination. However, there is usually no initial charge.

income tax and capital gains tax is payable by the fund at the standard rate and no further tax is payable by higher rate taxpayers until maturity. Tax deducted cannot be recovered, so they are not suitable for nontaxpayers.

Top slicing relief

The tax payable by standard rate taxpayers on maturity is calculated using top slicing relief. The original purchase price is deducted from the final value plus any withdrawals. That amount is then divided by the number of years you have held the fund.

This gives the extra 'slice' of income, which is added to your other income in the final year. If any of it falls into the higher rate band, then a further 18% is payable on that amount multiplied by the number of years.

Higher rate taxpayers

These will have to pay the extra 18% tax, but not until maturity, the advantage of the deferred tax being that the fund grows with only standard rate tax having been deducted.

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There are usually separate funds for equities, fixed interest and property. Often some of these categories are divided into UK and international investments.

There is usually a minimum investment period (often five years) with penalties for earlier termination. However, there is usually no initial charge.

income tax and capital gains tax is payable by the fund at the standard rate and no further tax is payable by higher rate taxpayers until maturity. Tax deducted cannot be recovered, so they are not suitable for nontaxpayers.

Top slicing relief

The tax payable by standard rate taxpayers on maturity is calculated using top slicing relief. The original purchase price is deducted from the final value plus any withdrawals. That amount is then divided by the number of years you have held the fund.

This gives the extra 'slice' of income, which is added to your other income in the final year. If any of it falls into the higher rate band, then a further 18% is payable on that amount multiplied by the number of years.

Higher rate taxpayers

These will have to pay the extra 18% tax, but not until maturity, the advantage of the deferred tax being that the fund grows with only standard rate tax having been deducted.

.

income tax and capital gains tax is payable by the fund at the standard rate and no further tax is payable by higher rate taxpayers until maturity. Tax deducted cannot be recovered, so they are not suitable for nontaxpayers.

Top slicing relief

The tax payable by standard rate taxpayers on maturity is calculated using top slicing relief. The original purchase price is deducted from the final value plus any withdrawals. That amount is then divided by the number of years you have held the fund.

This gives the extra 'slice' of income, which is added to your other income in the final year. If any of it falls into the higher rate band, then a further 18% is payable on that amount multiplied by the number of years.

Higher rate taxpayers

These will have to pay the extra 18% tax, but not until maturity, the advantage of the deferred tax being that the fund grows with only standard rate tax having been deducted.

y is calculated using top slicing relief. The original purchase price is deducted from the final value plus any withdrawals. That amount is then divided by the number of years you have held the fund.

This gives the extra 'slice' of income, which is added to your other income in the final year. If any of it falls into the higher rate band, then a further 18% is payable on that amount multiplied by the number of years.

Higher rate taxpayers

These will have to pay the extra 18% tax, but not until maturity, the advantage of the deferred tax being that the fund grows with only standard rate tax having been deducted.

the higher rate band, then a further 18% is payable on that amount multiplied by the number of years.

Higher rate taxpayers

These will have to pay the extra 18% tax, but not until maturity, the advantage of the deferred tax being that the fund grows with only standard rate tax having been deducted.

If withdrawals are made before maturity, up to 5% a year is treated as a return of capital, so no additional tax is immediately payable unless the 5% limit is exceeded. The percentage is on a cumulative basis, so you can exceed 5% in a year if you withdrew less in earlier years. There is no need to include the withdrawal on your tax return if it does not exceed 5%.

On retirement, when your income generally falls, the marginal rate for some higher rate taxpayers may no longer be above the standard rate band, so income can be taken without further income tax liability (unless it takes you back into the higher rate band).

Effect on income tax age allowances and tax credits

Another advantage of deferring income applies where otherwise the income would produce cutbacks to the extra income tax age allowances and to certain tax credits.

Guarantees

Sometimes there is a guarantee of performance (income and/or growth), but it may be subject to the performance of an index over the investment period, such as the UK all share index or the European Eurostoxx index.

Another form of guarantee is that you will get back at least as much as you originally invested. This may or may not be subject to the performance of an index.

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