Endowments sale - tax liability

splewington

Hi,

I'm pretty much decided that I am going to sell my two endowment policies and invest the proceeds elsewhere. Both are about 7 years old and have a combined surrender value of about £18k.

I have heard that the proceeds may be liable to income or CGT tax or something? Is this true? How can I find out for definate?

Thanks in advance..

Ian_W

I'm no expert but why not ring the insurers, they should be able to advise because if tax is due it's likely they may have to deduct it, as with savings interest.

I have a feeling tax may be due if it hasn't completed a certain % of the lifetime of the policy or 10 years, but I'm not certain of this.

HTH.

dunstonh

7 years in would not be enough and it could be chargeable for tax. However, unless you are a higher rate taxpayer or borderline to being one, I wouldnt worry about it as there is no liability if you are a basic rate taxpayer and the gain wouldnt take you into higher rate tax.

Before you decide to sell and pay a surrender penalty, check what other funds are available on the endowment. Do not assume the endowment is bad because you only hear complaints. There are still endowments paying surpluses.

splewington

Thanks dunstonh. Problem is I am a higher rate tax payer, although my wife who is a joint policy holder, isnt (but would be taken over the threshold by the £18k surrender value. How would this work, which bit would (might?) be taxed?

The policies have been performing really badly over the last 3-4 years with the total bonuses being added being circa £150pa total. I hadn't realised that I could change the endowment to another fund with the same provider? I guess the policies cant be that bad if Ive been offered £4k over the R&SA surrender value by a private buyer??

EdInvestor

I guess the policies cant be that bad if Ive been offered £4k over the R&SA surrender value by a private buyer??

Have you indeed? Very unusual. May we inquire by whom?