tax to pay on endowment policy

wayne1234

Hi ,about 4 years ago we had one of those destressing red letters saying that our endowment policy would no way near repay our mortgage amount.Straight away we changed mortgage to repayment so we would not have to worry.We have left endowment policy running as it was only £54 a month.When it matures in 7 years will we have to pay tax on the money we get.

Tibbledom

Most endowment policies initially set up in connection with a mortgage are qualifying policies. It should say this on your policy documents or you can check with your insurance company. What this means is that there is no tax to pay on the maturity proceeds. It is normally only endowment policies set up with an initial term of less than 10 years (not applicable here) which may incur a tax charge.

In addition if a qualifying endowment policy is surrendered within the first 10 years there is sometimes a tax charge payable if the owner is a higher rate tax payer - again not applicable here.

Tom_Kelly

Tibbledom wrote: »

Most endowment policies initially set up in connection with a mortgage are qualifying policies. It should say this on your policy documents or you can check with your insurance company. What this means is that there is no tax to pay on the maturity proceeds. It is normally only endowment policies set up with an initial term of less than 10 years (not applicable here) which may incur a tax charge.

In addition if a qualifying endowment policy is surrendered within the first 10 years there is sometimes a tax charge payable if the owner is a higher rate tax payer - again not applicable here.

Sorry to be picky but this could be a bit misleading.

Life assurance companies pay tax on gains made within the funds. Inindividual policy holders will therfore be deemed to have paid some tax already when they receive cash proceeds. To simplify things, the tax man gives a dispensation that no further tax is due unless the policy holder is a high rate tax payer.

The tax man gives a further dispensation that there is no further high rate tax to pay if the policy has qualifying status.

For a regular premium policy to be qualifying it must have an initial term of at least 10 years and premiums must have been paid for at least 75% of the term or 10 years if longer. E.G. for a 10 year initial term plan the premiums must have been paid for 7 years and six months, for a 12 year plan the premiums must have been paid for 9 years and for a plan of 14 years or more the premiums must have been paid for 10 years.

There are other criteria but, as it is an endowment policy, these will have been met automatically.

Finally, if the plan was non-qualifying for any reason,the tax rate applied would be the difference between the higher rate and basic rate. It is only the gain on the policy that is taxable which is the total proceeds minus the total premiums paid.

Tibbledom

Tom_Kelly wrote: »

Sorry to be picky but this could be a bit misleading.

I make it quite clear that the answer is dependant on the policy being a qualifying policy which it probably is.

It is much simpler to check with the insurance company whether the policy is qualifying than to check the terms of the policy against the complicated qualifying rules. In fact you oversimplify the rules in any case.

The question asked was whether there was any tax to pay on the maturity proceeds. If the insurance company pays out 10K then the policyholder gets 10K. So the answer is "no". Of course there is implicit tax paid by the insurance company along the way.

Why you need to make it any more complicated than that I don't know.

Tom_Kelly

Tibbledom wrote: »

Most endowment policies initially set up in connection with a mortgage are qualifying policies. It should say this on your policy documents or you can check with your insurance company. What this means is that there is no tax to pay on the maturity proceeds. It is normally only endowment policies set up with an initial term of less than 10 years (not applicable here) which may incur a tax charge.

Sorry for hitting a nerve. It wasn't a personal attack. If your answer was just a plain 'no' it would have been fine.

My response was not complicated in any way nor was it over simplifyinfg things. It was accurate and in my opinion it was worth adding some information for anyone reading this who was interested in the term 'qualifying policy'. Once again,I am sorry if you didn't think that I should do that.

Tibbledom

Tom_Kelly wrote: »

Tibbledom wrote: »

Most endowment policies initially set up in connection with a mortgage are qualifying policies. It should say this on your policy documents or you can check with your insurance company. What this means is that there is no tax to pay on the maturity proceeds. It is normally only endowment policies set up with an initial term of less than 10 years (not applicable here) which may incur a tax charge.

Sorry for hitting a nerve. It wasn't a personal attack. If your answer was just a plain 'no' it would have been fine.

My response was not complicated in any way nor was it over simplifyinfg things. It was accurate and in my opinion it was worth adding some information for anyone reading this who was interested in the term 'qualifying policy'. Once again,I am sorry if you didn't think that I should do that.

Sorry also. Something about your reply did hit a nerve. But from your subsequent response it is obvious that your first reply wasn't intended in the way that I had read it.

Apologies again. And thanks for your comments.

feisty1

[quote=Tom Kelly;17905501][quote=
quote=Tom Kelly;17905501][quote=_I am no longer authorised to provide mortgage advice or remortgage advice but I do have the qualifications and experience to be able to offer a sound opinion

Why do you use this signature? Is it to put yourself in an elevated position, if not what is the significance?

In fact I can't understand why any financial/mortgage adviser bothers to use a signature on here. As everybody is of equal value, nobody can give advice only opinion.

I am an adviser and I dip in and out.......it amazes me no matter what time it is, it is the same "advisers" answering questions.

In my opinion they can't be that great advisers otherwise they would be seeing clients and earning their living and not sat on here doing the job for free.

Certainly, we have seen a downturn in business, but clients still need serviced, referrals have to be seen, time to upskill etc......

Maybe I am missing a point and they are looking for easy business on here by posting and then people PM'ing them!

Tibbledom

feisty1 wrote: »

In fact I can't understand why any financial/mortgage adviser bothers to use a signature on here. As everybody is of equal value, nobody can give advice only opinion.

:T :T :T :T :T :T :T

Exactly. The first reply seemed to be saying "I am an adviser, your reply was rubbish, I know better than you, here's some irrelevant information OP to fool you into thinking this is the case". Everyone is equal as you say, and posters should concentrate on making their own comments and not rubbishing others or claiming superiority.

I am willing to give the adviser the benefit of the doubt that wasn't the intention here hence my apology, but I agree it would be a good idea if these sort of signatures were removed.

Sorry OP that we have digressed from your original question

dunstonh

In fact I can't understand why any financial/mortgage adviser bothers to use a signature on here. As everybody is of equal value, nobody can give advice only opinion.

Mine is there because my compliance department wanted it there.

In my opinion they can't be that great advisers otherwise they would be seeing clients and earning their living and not sat on here doing the job for free.

Or they are established with staff and income and have the time to do other things. Or perhaps they take tea breaks between writing reports and just surf various sites at the time.

Maybe I am missing a point and they are looking for easy business on here by posting and then people PM'ing them

You can spot the advisers that think there is money to be made here. They come, last a short time and never post again. After realising there is no money to be made here.

Tom_Kelly

feisty1 wrote: »

[quote=Tom Kelly;17905501][quote=
quote=Tom Kelly;17905501][quote=_I am no longer authorised to provide mortgage advice or remortgage advice but I do have the qualifications and experience to be able to offer a sound opinion

Why do you use this signature? Is it to put yourself in an elevated position, if not what is the significance?

I am now retired after selling my business. After my wife died last year I was at a bit of a loss and found myself contributing to a number of online forums. This is the only one that has consumers also contributing and I thought that everyone clarified their position with their signature. The last thing I wanted to do was upset anyone and so this will be my last post on this forum.

Tibbledom

I’m sorry to hear that and about your wife.

Before apologising earlier I looked back through your postings on other threads and I say genuinely and without exception that they are all polite, thought out and very helpful.

We certainly upset each other earlier on this thread but I certainly hold no ill feelings towards you.

I hope you reconsider and continue posting.

Good luck.