Income tax on endowments?

JackRS

When an endowment policy matures to pay off a mortgage does income tax apply to the full amount or only to the surplus after clearing the mortgage?

Like most I’ve got a predicted shortfall so many years ago change to a part repayment and have also been overpaying the interest only portion.

So if there is a surplus I’d be liable for income tax due to me overpaying? If this is the case I’d be better putting money into ISA than overpaying?

EdInvestor

If it's a "qualifying" policy (over 10 years old) then there is no tax to pay.

JackRS

Thanks Yes they are.

So OK to overpay although at current mortgage rate of 2.17% I guess it would be better to save and this is the wrong forum for that question, sorry.

artha

EdInvestor wrote: »

If it's a "qualifying" policy (over 10 years old) then there is no tax to pay.

Not sure whats indicated here. What is a qualifying policy?Can you please expand?

dunstonh

What is a qualifying policy?

All life investments are either non-qualifying or qualifying. Endowments had a maturity date which allowed them to be classed as qualifying plans. Nowadays, the only real mainstream life investment left open for business are investment bonds. These are mostly "single premium, non qualifying whole of life assurance" and can never qualify. Years ago there were many more types and the terminology was more well known.

With a qualifying plan, there comes a point when it qualifies to be exempt from personal taxation. Getting to the 10 year point is one of these.