Help - Chargeable gain

Tricky1978

Hopefully someone can help confirm some details for me so I understand what to do next.

I have been left a sum of money in the form of an offshore policy. I have been assigned a 5th of the policy which I believe is worth roughly £45k.

I have been sent a letter to say that the there will be a 'chargable event' when I encash my segment segment of the policy and the chargeable gain will be roughly £15k.

My very basic understanding is that as I am a higher rate tax payer, I will pay 18% tax on this £15k and will need to fill out a self assessment form after the 1st of April this year?

I think I will need to see an IFA before I spend a penny of the £45k.

Any direction welcome!!

Thanks in advance,
Richard

MrRedundant

I am afraid as a higher rate tax payer the rate is now 28% I believe. You do however have an annual exemption which currently stands at £10,100 at the moment.

Where you related to the person at all?

There may be some benefit if you are married in passing part of the gain to them to use both exemptions.

CGT is fairly complex though so you will likely need some advice

Tricky1978

Yes, the person that left me the money was a my great Aunt.

I am married so from what you are saying, that should help.

Who would specialise in this sort of thing?

MrRedundant

Ok I am working on the basis you have been assigned the policy rather than the proceeds? It may be worth considering whether the policy could just be cashed in and subjected to IHT and the cash gifted to the recipients if the exemption threshold and other reliefs mean it wont be subject to 40% tax.

By gifting the policy you are subject to CGT on the basis sale price - base cost (current market value at date of death). This will then give you your chargable gain. You can then deduct from this your AE and get the taxable value. The CGT from acquisition to date of death (i.e base) should be borne by the estate. As you are getting a set part of the policy this shouldnt affect you. Tbh I would expect the chargable gain to be a lot less if you simply sell straight away as your base cost is the market value and I'd expect the market value to reflect the value you would cash it in at.

I'd be surprised if you end up with much tax liability if you plan the disposal properly.

If the asset can easily be gifted then you could consider gifting half the asset to your wife and then you both sell and use the AE twice.

Tbh CGT can be complex especially in circumstances like this and you should seek advice from an accountant for the ins and outs. I am not all that up on it and I am probably misremembering one of the reliefs or parts of it.

BoGoF

I think you may be giving the OP false hope.

Chargeable Events do not fall under the scope of Capital Gains tax but Income tax with no annual exemption.

Depending on whether notional tax has been deducted or not the tax will either be 40% or 20%

MrRedundant

BoGoF wrote: »

I think you may be giving the OP false hope.

Chargeable Events do not fall under the scope of Capital Gains tax but Income tax with no annual exemption.

Depending on whether notional tax has been deducted or not the tax will either be 40% or 20%

My error. I read Chargeable event as chargeable gain for some reason.

Cook_County

BoGoF wrote: »

I think you may be giving the OP false hope.

Chargeable Events do not fall under the scope of Capital Gains tax but Income tax with no annual exemption.

Depending on whether notional tax has been deducted or not the tax will either be 40% or 20%

or indeed 50%...

Tricky1978

Sorry, I have added to the confusion, my letter says the following:

'I can confirm as at todays date a chargeable event would incur in the event of a surrender of the policy. We calculate that the chargeable gain arising would be approximately £15k'.

Thanks,
Richard

jimmo

Tricky1978 wrote: »

... my letter says the following:

'I can confirm as at todays date a chargeable event would incur in the event of a surrender of the policy. We calculate that the chargeable gain arising would be approximately £15k'.

If that letter you received came from the insurance company and was addressed to you, that is clear enough but one other question.
Was the policy arranged through a UK branch of the Insurance company?
If the letter didn't come from the insurance company but somebody else, can you give further explanation?

Tricky1978

The letter did come directly to me as a benificiary of 1/5th of this policy.

I would imagin the policy was taken out in the UK via my great Aunt's financial advisors who are based in Dundee.

Thanks!

goRt

Tricky1978 wrote: »

... and will need to fill out a self assessment form after the 1st of April this year?...

Tax year runs from 6th April - 5th April!