High-rate tax payers face increase in bond taxation

The 5% tax deferral rule on investment bonds will become more attractive to higher rate tax payers as they face an additional 2% income tax on chargeable gains from 6 April 2004. With effect from 1 April 2003, corporation tax paid within life funds has fallen to a flat rate of 20%. Previously life funds bore this tax at an overall rate of 22% and in non-qualifying policies, such as investment bonds, basic-rate tax payers had no further income or capital gains tax liability on investment gains. However, higher-rate tax payers faced an excess income tax charge of 18%, which is the 40% ...