Selling endowment - tax implications?

sir_savealot

Hi

I'm in the process of selling my Norwich Union endowment through a TEP broker. The offer they have quoted is a gross purchase price of approximately £13000. Will I be liable for any tax?

Thanks

JollyNolly

I may be in a similar position - NU endowment, current surrender value around £18K, thinking of selling to third parties. I've been told I won't be liable for tax, but I'd also be grateful for other opinions. BTW, Sir S, what's the difference between your surrender value from NU and the price you have been offered?

dreamylittledream

How long have the policies been running?

The tax rules are rather complex but suffice to say if you are not currently a higher rate tax payer (or very near the threshold) you won't be liable for any tax...

JollyNolly

dreamylittledream wrote:

How long have the policies been running?

The tax rules are rather complex but suffice to say if you are not currently a higher rate tax payer (or very near the threshold) you won't be liable for any tax...

My policy's been running for yonks - about 18 years in fact - and yes, I'm somewhere near the higher rate tax threshold. How will I be affected?

dreamylittledream

If the policy has been running more then 10 years and is a 'qualifying policy' (almost all traditional endowments are) then there is no tax liability on surrender or sale.

So you should be fine!

JollyNolly

dreamylittledream wrote:

If the policy has been running more then 10 years and is a 'qualifying policy' (almost all traditional endowments are) then there is no tax liability on surrender or sale.

So you should be fine!

That's certainly a relief - but then I never really expected to have to pay tax on it, after all, it was originally intended to pay off my mortgage, so if tax was taken off then presumably I'd have been left with a shortfall. But hey - I've got my own shortfall anyway!

My other point about my NU endowment is - should I actually be selling it right now anyway? From the recent quotes I've had for its surrender value I'm getting the impression it's not doing too badly - it's gone up from £16700 to £18500 in a matter of 5 or six months. I have no clue about investing at all, but maybe I should hang on a while longer?

sir_savealot

Reassuring that I won't be liable for tax. JollyNolly - the difference between the NU surrender value and the offer I have been made is about £1500. FYI, the company I used was Surrenda-Link.

dunstonh

Do note that if someone is willing to buy it, that usually means that there is some merit in keeping it. NU are one of the better with profits funds out there.

JollyNolly

As I haven't yet committed to selling or surrendering, presumably I just keep checking on the current surrender value and matching it against what might have been gained by putting it into savings or (as in my case) using it to pay of a slab of my mortgage. Is there any easy way of doing this?

Also (coming back to the original topic) is there a definitive way of finding out about tax liabilities on any particular endowment product? Would NU be able to say for sure?

dreamylittledream

JollyNolly wrote:

As I haven't yet committed to selling or surrendering, presumably I just keep checking on the current surrender value and matching it against what might have been gained by putting it into savings or (as in my case) using it to pay of a slab of my mortgage. Is there any easy way of doing this?

Also (coming back to the original topic) is there a definitive way of finding out about tax liabilities on any particular endowment product? Would NU be able to say for sure?

NU would be able to confirm if your policy is qualifying or not.

HMRC would then be able to confirm the tax position based on that information.

As I said previously the surrender or 'assignment for moneys worth' (ie sale) of a qualifying policy after 10 years (or three quarters of its term if sooner) will not bring any liability to tax.

Also dunstoh made a very valid point above.

However you should also bear in mind that the endowment is a risk based invetsment - whoever you are selling to will be willing to accept those risks - the question is are you?

JollyNolly

dreamylittledream wrote:

... you should also bear in mind that the endowment is a risk based invetsment ...

You're not kidding! It was the risk that got me into this mess in the first place, something that was totally glossed over by the salesman who sold it to us - the one who told us how we would most likely make tens of thousands out of it. Sort of ironic that the endowment starts to perform decently at the very moment when I really need to cash it in.