Endowment selling and tax

JollyNolly

I'm sure this is simple, but Norwich Union can't tell me anything. If I sell my NU Low-Cost endowment, will I be liable for any tax on its surrender value?

JollyNolly

Anybody help??

maninthestreet

Do you mean selling it on the traded endowment market, or surrendering the policy to NU?

JollyNolly

Well, Surrendalink are offering about £2K more, so the plan was to sell to them.

maninthestreet

"If you are the original beneficial owner of the policy, that is to say if you were the person who took it out, there is no tax liability on the proceeds of the sale or auction of the policy. As you may be aware, income tax will already have been paid on any dividend income generated by the policy's investments. When you sell a policy that you originally took out you have no income tax liability and nor will you be liable to capital gains tax."


http://www.moneyextra.com/guides/traded-endowment-policies-011460.html#N10114

dunstonh

Norwich Union cant tell you anything as they do not have any advisers. The question you ask comes under advice. They aren't being difficult. They just cant under FSA rules.

If you are a higher rate taxpayer or borderline you could face a tax liability because you are creating a chargeable event. If the endowment has run long enough to "qualify", it would be exempt from further tax.

As NU endowments are generally not too bad, it is possible.

Note, if you are basing your surrender on the projections, you should be aware that neither the endowment promise payment or terminal bonus are taken into account with the projections. They need to be added to the projection figure to see how its really doing. In most cases, when you do that, you find you are either not too far off or heading for a small surplus.