Tax liability on Endowment at Maturity

KevinE

Hi all I have just registered on the forum but I have been referring to its contents for a few years now.
I am hoping someone out there can give me some advice

I have just received a letter from my Endowment Company, as my Policy is about to mature,
Initially the policy was in joint names when taken out in 1985, but after splitting with my partner a couple of years later it was assigned to me. It is not against the mortgage as when re-mortgaging I started a new Endowment, which is now predicting a shortfall in the order of £25000.

As such I understand this makes the maturing policy a chargeable event, As the terminal bonus is currently only an estimate the predicted gain of the policy will be in the region of £14000 which will on top of the £14000 I have paid in premiums over the period.

Normally this would not be to much of an issue as I would normally have been a basic rate tax payer, but earlier this year (End of July) I was made redundant after 22 years and received a payout that has this year moved me into the higher rate tax bracket.

Am I correct in thinking that I will be liable to pay tax at 20% on the gain of the policy after its 25 years maturity, even though there has been very little or no Bonuses added over the past 5 years, with the majority of the gains being made years ago.

My intention is to use the money from this maturing endowment to reduce my current mortgage and hence cover the shortfall of the second Endowment.

thanks in advance

need_help_please_2

As far as I am aware, most endowment policies contain an element of life cover to ensure the payouts are tax free, so it shouldn't be an issue.