Tax implication on selling or surrendering endowment policy

rs3100

Hi, I hope someone can advise me on this:

I have a 25 year endowment policy (with profits linked) which was started in March 1999.

The policy was taken out to repay a £105,000 mortgage obtained at the same time, and as with many similar policies the projected value on maturity is now much less than originally quoted, with a guaranteed value of £58,000, which I have worked out will be less than the premiums paid over the term of the policy (although I realise that the final value could be more than this).

Anyway, I am now in the fortunate position of being able to pay of my mortgage completely, and therefore have no further need for the endowment. Bonuses for the last few years have been added at the minimum (guaranteed) rate of 3 per cent, and I suspect that I can get a better return on my £215 monthly premiums by investing the money elsewhere, and I really don't fancy paying into what I suspect to be a dead duck for another 17 years.

As I understand it, because the policy was started less than 10 years ago, it will no longer be a qualifying policy if I surrender or sell it, and I will therefore become liable to income tax.

But what I don't understand is - would I be liable to pay tax on the entire amount that I might sell or surrender the policy for, or only on any profit made on the sale, i.e. the difference between the surrender value and the cost of all premiums paid to date? If the latter, I suspect that I am likely to get back less than I have paid anyway, so would that mean there would be no tax implication?

JoeK_3

Based on the details that you have posted, there would not be any tax liability as you have not made any profit.

rs3100

Thank you