I am in the fortunate position of just having a life insurance policy mature. As I have been paying regular premiums for the last many years I believe that it is a qualifying policy. Reading the FT personal tax 2011/12 on P217 it states that I 'do not enter the details in my tax return'. Would somebody please confirm.
The certificate of chargeable gain that I received from the insurance company shows;
Preniums paid, Total gain on chargeable event, amount paid out, amount of tax treated as paid which is 20% of the Total gain.
Is there capital gains on insurance and if it is less than the allowable value is it possible to claim the tax back?
Firstly, you will NOT pay capital gains tax. You pay income tax!
Whether you pay any further tax depends on whether the policy is qualifying or non-qualifying.
Qualifying Policy
Most monthly or annual premium investment policies, such as regular premium endowments, are classed as qualifying policies. With these you pay no tax on the proceeds when the policy matures even if you are a higher-rate taxpayer. But this doesnt mean these investments are tax-free.
Endowments are an example of a qualifying policy
The insurance fund into which your money is invested has paid tax, and this tax cant be reclaimed.
A qualifying policy becomes a non-qualifying policy if you cash it in or stop the premiums either before 10 years have passed, or before it is three-quarters of the way through the term (whichever comes first).
Non-Qualifying Policy
Single premium investment bonds are classed as non-qualifying policies and do attract further income tax when you cash them in if you have made a gain and are a higher-rate taxpayer.
Usually the gain from a non-qualifying policy (or a qualifying policy that has become non-qualifying), counts as part of your income for the year you receive it.
There is no further basic-rate tax to pay (as this has been deducted from the investment fund) but higher-rate tax could be due at the difference between the higher and basic rate.
Your policy provider is required to provide a 'chargeable events certificate' including information about what type of policy you have and whether tax is due.
Mello MJH and many thanks for your response. I have been paying regular amounts on a regular basis during the lifetime of the policy so it is a qualifying policy.
Do I have to enter any details on my tax self assessment? As I mentioned the FT personal tax 2011/12 says not but I would like to have confirmation from a third party.
Hello, Thanks for pushing me on the qualifying point. I have contacted the insurance company and the policy is non-qualifying. They are going to check why and get back to me in the next couple of weeks.
I originally started the policy just over 40 years. After a couple of years I realised I had been sold the wrong policy and after creating a scene in the insurance office, the amount of the premiums being paid was reduced.
Since then the premiums have been paid regularly on a 1/4ly basis.
I have just spoken to HMRC and been told that I have to enter the 'total gain on the chargeable event' onto my tax return. I do not need to enter the tax as they will calculate it.
