'Can I cash in my investment bonds without risking a tax bill?'

In the late 1990s, I took out several bonds with a life insurance company. I’ve never withdrawn any money, but I now want to do so. The insurance company has told me that I can take £5,000 from each bond without incurring tax. But is there a risk that adding up the £5,000 withdrawals from several different bonds could lead to a tax bill?Jackie from Nottingham

'What matters is how much you invested, and when'

Samm Galloway, Which? money expert, says…

These sound like investment bonds. They allow you to take 5% of the original capital amount invested, for each total year the bond has been held, up to a maximum of 20 years. 

Because the £5,000 you’re taking from each is the capital, not the profit, this is tax-free. 

As the bonds are separate from each other, the tax-free withdrawals from each won’t be added up to create a tax liability.

In fact, as you have held these bonds for more than 20 years, you could, if you choose to, take 100% of the original capital from each bond with no tax bill.

If you take more than the original capital – for example if you fully surrender the bond – as you would be taking the gains, this creates a chargeable event. 

A process known as top-slicing considers your income in the tax year that the chargeable event occurs and the total gain. 

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source https://www.which.co.uk/news/article/can-i-cash-in-my-investment-bonds-without-risking-a-tax-bill-aMDHV0H71CmZ