Module 1 – Introduction to bonds taxation
Bonds and tax
Introduction to bonds taxation
Course Objectives
The bonds brainteaser
Additional resources
Answers to questions in module 1
Welcome to module 1 – introduction to bonds taxation.
Nobody likes a huge tax bill. Let’s face it, mistakes can happen and unfortunately do rather too frequently when it comes to calculating tax efficiently on bonds. It’s not surprising - tax can be a very complex subject. However, mistakes are costly: to AEGON UK, sales consultants, financial advisers and especially our customers.
In this course we’ll explain step by step all the information you need to identify when and how much tax is due on a bond.
No more confusion, no more errors.
Introduction to bonds taxation
This eLearning course aims to:
1. raise awareness of our bond products by:
2. reduce the number of enquiries on how to make the gain calculation on a bond by:
3. reduce the number of errors made by not selecting the most appropriate tax rule:
When you’ve completed this course you’ll be able to:
You may be experienced in using bonds products already, or you may be new to bonds taxation. Either way, this training course is designed to help you enhance your understanding of bonds and help you sell them more successfully.
Let’s try a few questions first and see what you know already.
This isn’t a test; it won’t matter if you don’t know the answers. Your answers should give you an indication of where the gaps are in your current knowledge. You can find the answers at the end of this module.
The bonds brainteaser – question 1
Mr Northcroft is a higher rate taxpayer and is confident he’s entitled to top slicing relief on any gain from his bond policy. Is he right?
Option 1 - Yes
Option 2 - No
The bonds brainteaser – question 2
The ‘full surrender of individual segments’ is when an equal amount is withdrawn from each segment across the whole policy. Is this statement true or false?
Option 1 – True
Option 2 - False
The bonds brainteaser – question 3
When working out the 5% rule on partial withdrawals, which of the following values is used as part of the calculation?
Option 1 – The total premiums paid for the whole policy
Option 2 – The current surrender value
For more information on related topics like inheritance tax, trusts and offshore investment, check out our other online literature. If you are an AEGON UK employee the literature is available on the company intranet (Compass) otherwise it can be accessed from the AEGON Scottish Equitable or AEGON (the brand name of AEGON Ireland plc) websites at:
There’s a quiz at the end of the course, to test your knowledge and see how much you’ve learned. If your score is high enough you’ll be able to print out a certificate of completion.
Now click on the ‘Menu’ button to return to the main menu. We recommend you progress through the course in sequence and start at module 2 – what is a bond? However, if you know what you are looking for then you can also go direct to that module.
Answers to questions in module 1
The bonds brainteaser – question 1
Mr Northcroft is a higher rate taxpayer and is confident he’s entitled to top slicing relief on any gain from his bond policy. Is he right?
Option 1 - Yes
Option 2 - No
Answer
How did you get on? The correct answer is option 2 – No. Well done if you correctly identified that Mr Northcroft is mistaken. Higher rate taxpayers are not entitled to top slicing relief.
The bonds brainteaser – question 2
The ‘full surrender of individual segments’ is when an equal amount is withdrawn from each segment across the whole policy. Is this statement true or false?
Option 1 – True
Option 2 - False
Answer
What do you think? The correct answer is option 2 – false. Hopefully you recognised the above statement is false. Actually, the surrender of individual segments is when the required number of segments are fully surrendered. However, a partial withdrawal takes an equal amount from each segment across the whole policy.
The bonds brainteaser – question 3
When working out the 5% rule on partial withdrawals, which of the following values is used as part of the calculation?
Option 1 – The total premiums paid for the whole policy
Option 2 – The current surrender value
Answer
Did you select the right answer, option 1? The 5% rule on partial withdrawals uses the total premiums paid for the whole policy. We’ll look at these calculations in more detail later on in the course.
The bonds brainteaser – your score!
How did you get on with the three questions? Take a look below for more detail on where we’ll cover these subjects in this course.
Question 1 relates to module 9 - we cover the principles for top slicing relief.
Question 2 relates to module 7 - we explain how to take money from the bond.
Question 3 relates to module 6 - we investigate how to calculate the 5% rule on a gain.
Remember, whether you have scored well or not here, it’s worth reviewing the material in this course to check and build on your existing knowledge.