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Working Tax Credit and Capital Investment Bond

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I have bought a Capital Investment Bond with the money I inherited from my mother.

 

The financial advisor who set this up, informs me that the monthly sums I receive from my Capital Investments Bond are neither interest or dividends, but that the bond is simply returning my capital to me which I used to buy the bond in the first place, and is therefore not taxable. Thus, the sums I receive are simply not entered on my tax return, and should not be declared for the purposes of assessing my Working Tax Credits either. Is this right?

 

I ask, because last year the advisor I spoke to at HMRC said that the sums I receive DO count as income (he obviously had no idea about Investment Bonds and the notion of "return of capital"). I suspect I have been diddled, as my Tax Credits have been reduced in consequence.

 

Should I take matters into my own hands and simply not mention my Investment Bond? I have been searching the Internet for hours in vain, hoping to find answers. And now I have washed up here.

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Normally it is only taxable income that is included so I suspect your financial advisor is correct (then only interest on your savings and investments would be included for tax credits) but investments are a bit outwith the remit of tax credit advisors so it can be difficult to confirm.

 

Best place to look is the manual - https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0120080

 

and the technical manual - https://www.gov.uk/hmrc-internal-manuals/tax-credits-technical-manual/tctm04500

 

I did a search and can't find the word Capital at all, so perhaps you can find the one that fits your investment, or get your financial advisor to confirm which one is yours.

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Hello there.

 

My knowledge of investment bonds is a little out of date, but my understanding is that you can draw 5% of what was invested each year for 20 years, broadly speaking. After that, the initial capital has been returned and there are potential tax implications. Here's a link from the Money Advice Service.

 

https://www.moneyadviceservice.org.uk/en/articles/investment-bonds

 

HB


Illegitimi non carborundum

 

 

 

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