If he cashed in the whole value, lets say £25k, how is that taxed?
I think its liable to income tax but the original amount that was paid in by the grandparent would be deducted. In this case £7k.
I'm told that because the profits that sit in that fund will have already suffered Corp Tax, that he would only be liable for any tax if his earnings tip over and above the basic rate threshold. If thats correct then he apparently completes his self assessment as receiving the net £18k income, pays tax on it but then reclaims the overpaid tax on an R40.
or he could just cash in enough to be below the £12.5k PA so he pays no tax, and cashes in the remainder after tax year end..... hence no need to then reclaim anything as its all under the PA in both years.
What if we can't establish exactly what the approx £7k value was, as it was so many years ago and the grandparent is now deceased?
Can anyone confirm or offer other advice?