Endowments and tax implications

boardy2

Hi,

My endowment has run it's course and will pay up next month and I am going to cash in a second endowment 3 1/2 years early. Both of these together will pay off the remainder of my mortgage (luckily I converted half my mortgage to repayment 10 years ago when it became apparent that the endowments would not cover the mortgage :mad:).

Will I be liable for any sort of tax on the money that I receive?

Cheers in advance for any info.

Boardy2

holly_hobby

Low cost (aka mortgage) endowments are whats called qualifying policies, which means that their proceeds are paid free of tax if (and this is very basic qual rules) :-

The initial policy term was 10 yrs or more (which I assume it was) or prems paid for 75% of the term if less than 10 yrs

Prems payable yearly or more frequently ie monthly - which your policies will have been

Sum assured represtents at least 75% of the prems payable over the term - which it will have done

You haven't made an material changes to the policy during its term - which I assume you haven't.

So, assuming the above terms are met, no tax liability on your proceeds .....

Hope this helps

Holly

boardy2

Thanks for that Holly, it really is appreciated. I went from elation over paying my mortgage off to deflation when the literature for cashing in said that there could be tax penalties.

Regards,

Boardy2.

holly_hobby

Yep standard wording in case qualifying regs haven't been met as breifly touched on i.e where there has been a mid term adjustment, etc.

Fret not, if this doesn't apply to you...

H