Newsletter 2026
Happy New Year to you all from The Wright Financial Company!
Another great year for investors took place over the last 12 months! That’s despite the downturn we had between January to April last year due to Mr. Trumps tariffs! Smoothed funds have performed well with Prudential Bond holders and ISA holders enjoying no falls at all now since August 2023. LV smoothed funds have also performed well. For clients investing on various platforms such as Fidelity & Quilter double figure returns have been achieved in a number of funds. Scottish Widows pension portfolios are showing superb results with portfolio one returning 15.4% and even the cautious Portfolio four returning 10.4% over the year.
What IHT changes were announced in the Budget?
From April 2027, ISA rules will change. The key updates are: The overall £20,000 annual ISA allowance stays the same for people under 65, the cash ISA allowance will be capped at £12,000. People aged 65 and over will still be able to contribute £20,000 to a cash if they prefer. The cash cap only applies to the cash ISA. You can still put your full £20,000 annual allowance into a stocks and shares ISA or innovative finance ISA if you prefer. As part of the ISA reform, the annual ISA allowance will be frozen at £20,000 until 2030.
Investment bonds are becoming increasingly popular with changes that have taken place to capital gains tax annual allowances. An investment bond gives you the potential for medium to long-term growth on your money, over 5-10 years or more, along with fund management expertise. You also get access to a mixture of funds, which are looked after by professional investment managers. Of course, like any investment, the value can go down as well as up so you might not get back what you put in. Investment bonds are usually classed as a single premium ‘life insurance’ policy because a portion of your ‘life insurance’ policy can be paid out upon death, but they're really an investment product.
So, if your need is solely for life insurance, you might want to research other more tailored options. There may also be a minimum investment amount that may range typically between £5,000 and £10,000. You can withdraw up to 5% per annum of the amount invested without paying any immediate tax. Tax rules can change, and the impact of taxation and any tax relief depends on your circumstances, including where you live.
Types of investment bonds
Investment bonds mainly fall into two categories, onshore and offshore. The main difference is their tax treatment. In high-level terms, those onshore are subject to UK corporation tax, which is offset by your provider, while offshore bonds are issued from outside the UK and the returns roll up gross of tax in the funds, apart from Withholding Tax, as described below. Offshore bonds may also offer a wider choice of funds.
Onshore investment bonds
UK Investment Bonds are non-income-producing investments and so have a different tax treatment from other UK based investments. This can provide valuable tax planning opportunities for individuals. The funds underlying the bond are subject to UK life fund taxation meaning that you're treated as having paid Income Tax at the basic rate on the amount of your gain. This notional tax is not repayable in any circumstances. You will have no liability to Capital Gains Tax or basic rate Income Tax on bond gains.
Taking withdrawals from the bond
An investment bond could therefore be a potentially tax-efficient way of holding a range of investment funds in one place. You can withdraw up to 5% each year of the amount you have paid into your bond without paying any immediate tax on it. This allowance is cumulative so any unused part of this 5% limit can be carried forward to future years (although the total cannot be greater than 100% of the amount paid in). You will often see this referred to as the "5% tax-deferred allowance". However, if you decide to take more than the accumulated 5% tax-deferred allowance, you will create a gain equal to the amount taken over the allowance. Your insurance company will send you details of the chargeable event gain arising for you to notify HMRC of the gain, upon which, you might be liable for additional Income Tax.
Please contact Richard for further help and advice on 01937 372132 or email rwright@thewrightfinancial.co.uk or admin@thewrightfinancial.co.uk
Prize Draw time –All you have to do is answer a question. The answer is somewhere in this Newsletter, email the answer back to: - admin@thewrightfinancial.co.uk 4 lucky winners picked at random will receive M&S vouchers.
This year’s question is: - From April 2027 what is the maximum investment into a cash ISA for a 50-year-old saver? Closing date 30 April 2026.
The Wright Financial Company Limited is authorised and regulated by the Financial Conduct Authority. FCA Registration number: 926034. The Wright Financial Company Limited Registered No: 11793303. Registered in England. Registered Address: Tadcaster Enterprise Park, Commer House, Station Road, Tadcaster LS24 9JF
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