Will I pay tax on my endowment policy

robson230459

I have just received an endowment payout of £34,076 and my endowment was to pay £15000, although originally in 1987 the sum assured on the policy was £30,160. When we realised that there may be a shortfall we moved £15,000 to repayment. I have been paying interest only of £53 each month to my building society for the £15000, and full repayment on the other. The endowment was paid monthly for 25 years starting on 15th May 1987 at £43.00 per month. I guess I have a capital gain of £19,076? The difference between what I owe the building society and the matured sum? Do you know if I will have to pay any tax and if so what the % tax rate would be? I am a 40% tax payer and earn about 70K a year. The actual name on the policy is " Low cost endowment assurance with profit". The policy included life insurance. As I understand it the policy was "qualifying" as it was over 10 years and a fixed payment that ran its term.

Any help much appreciated

TrickyDicky101

Assuming you took this policy out originally then no, you won't have to pay any tax, either income or CGT

holly_hobby

Relax ... you have no tax liability - either income or CGT.

This is becuase a low cost endowment, is a qualifying policy for tax purposes (ie benefits are paid free from tax), to which your comments confirm you have met the basic qualifying requirements for a tax free payment on maturity.

So rest easy, and don't spend it all in 1 shop !

Hope this helps

Holly x

robson230459

holly_hobby wrote: »

Relax ... you have no tax liability - either income or CGT.

This is becuase a low cost endowment, is a qualifying policy for tax purposes (ie benefits are paid free from tax), to which your comments confirm you have met the basic qualifying requirements for a tax free payment on maturity.

So rest easy, and don't spend it all in 1 shop !

Hope this helps

Holly x

Many thanks for the reply, great news we have never had any savings or inheritance so nice little nest egg, may even treat ouselve to a holiday. thanks again

kingstreet

Provided you made no alterations to the policy which may have affected its qualifying status, it should remain qualifying and free of UK income, corporation and capital gains taxes on maturity.