UK investment management firm Skandia has launched a new financial planning tool which allows advisers to demonstrate how to maximize tax efficient withdrawals from collective investments and investment bonds.

The move was prompted by the UK government’s decision to introduce 50 per cent tax on income over £150,000 (£232,400) and progressively withdraw personal tax allowances for those with income over £100,000.

Advisers usually choose to invest in and take withdrawals from one investment product or the other. But the new financial planning tool can show how withdrawals could be made by using a combination of collectives and investment bonds without paying tax for up to three or four decades.

Skandia's tool combines the use of the 5 per cent tax deferred allowance of bonds alongside the part disposal formula and the capital gains tax annual exemption for collective investments.

Withdrawals can be established which may not be liable to tax for up to three or four decades by investing differing amounts and selecting different levels of withdrawals for each investment.

Each component of the calculator is variable allowing advisers to make changes to explore how to get the best result for their client. Growth greater than expected on the collective investment may result in CGT being payable earlier than expected.

“The restriction on the amount of higher rate tax relief available on pension contributions is going to lead to demand for alternative investment solutions for higher earners. At the same time the increase in income tax for these people is going to result in careful financial planning to ensure capital extraction is combined with income to enable withdrawals to be made from these investment solutions as tax efficiently as possible,” says Colin Jelley, head of tax and financial planning at Skandia.