We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Tax advice re surrendering endowment?
weatherwax_2
Posts: 392 Forumite
We're about to cash in a useless endowment.
It says on the terms of surrender:
'The Inland Revenue consider early surrender or withdrawals as income. If you request either of these transactions you may incur a liability to Higher Rate Tax.'
Does this mean we will be taxed on the early surrender of an endowment?
To whom would Higher Rate Tax apply?
If it is taxable, would it be better to have it paid into my account (as opposed to my husbands', who is employed) as I'm a non-taxpayer, or would the fact that I'm a non-taxpayer make any difference?
The policy is a joint one.
The above questions may seem naive but that's why I'm here! Any advice, o wise ones? :-/
It says on the terms of surrender:
'The Inland Revenue consider early surrender or withdrawals as income. If you request either of these transactions you may incur a liability to Higher Rate Tax.'
Does this mean we will be taxed on the early surrender of an endowment?
To whom would Higher Rate Tax apply?
If it is taxable, would it be better to have it paid into my account (as opposed to my husbands', who is employed) as I'm a non-taxpayer, or would the fact that I'm a non-taxpayer make any difference?
The policy is a joint one.
The above questions may seem naive but that's why I'm here! Any advice, o wise ones? :-/
'Puritanism: the haunting fear that someone, somewhere, may be happy'.
H L Mencken
H L Mencken
0
Comments
-
Early surrender of an endowment is considered a "chargeable event". If the plan is less than 10 years old and you are a higher rate tax payer, then there will be a liability for higher rate tax on it. (there are certain other criteria that can alter that but 10 years is the most common one).
The tax is based on the owner of the endowment. So, if its a joint life endowment and one of you is a higher rate tax payer, the tax liability will be half. Where the surrender is paid has no impact on the tax.
If the endowment is a fair to good one, then it can be beneficial for the higher rate tax payer to continue it until such time it has past the 10 year point or maturity as there would be no higher rate tax to pay.
Additionally, if the plan was placed in force before 14 March 1984 then the plan has life assurance premium relief. You would lose that. Plans that have LAPR also tend to be the better endowments. The benefit of LAPR is not as great as it used to be. Labour have reduced the benefit down to 12.5%. However, thats still worth keeping.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
My husband and I are also looking at surrendering our two endowments which were taken out more than 10 years ago (1989 and 1993). Would we be liable for tax on them? Sorry if this is an obvious question but reading the above got me thinking.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.7K Banking & Borrowing
- 253.4K Reduce Debt & Boost Income
- 454K Spending & Discounts
- 244.7K Work, Benefits & Business
- 600.1K Mortgages, Homes & Bills
- 177.3K Life & Family
- 258.4K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards