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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15933
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am retired, on a good pension that makes me a higher tax

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I am retired, on a good pension that makes me a higher tax payer. I have two with profit endowment insurance policies with mature in the next month. They have both been running since 1977 with monthly payments. There are significant terminal bonuses. Can I expect a tax bill? If so will this relate to the difference between the premiums paid and the final maturity value of the policies?

Thanks

PJH

Hi.

You shouldn't have any tax to pay.

Take a look at the sections on qualifying life policies in HS320 (pages 3, 4 and 6). Unless changes to the policy as described on those pages occurred, your profit will be exempt from tax because the policy would have remained as a "qualifying policy".

If the policy became a non-qualifying policy, then the profit as you appear to understand it will be subject to higher rate tax with credit given for basic rate tax treated as paid on the gain. In your case, top-slicing relief will be ineffective as you are already a higher rate taxpayer before the policy gain is added. The life company will issue you with a chargeable event certificate if there is a taxable gain.

I hope this helps but let me know if you have any further questions.

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Customer: replied 3 years ago.

That was just the quick reply with authoritative reference that I was after. Even better as the answer is in my favour regarding possible tax payments.


Thanks


PJH

You've had those policies a long time I have to say. Thanks for accepting my answer.