Cashing in Life Assurance policy

Flex999

Dear Colleagues,

This is my first time here on MSE, so hello.

I have a quick questions... If you were to cash in a life assurance policy would the payment you receive be subject to tax? I have about 10 or so years left on a policy and I am considering cashing in a policy to make ends meet.

Any advice you can offer would be greatly appreciated.

Many thanks

Flex999

dunstonh

If you were to cash in a life assurance policy would the payment you receive be subject to tax?

Depends on the type of life assurance. A non-qualifying policy would have the potential to have a tax liability. A qualifying plan that has qualified would have no further tax.

They are considered to have met basic rate tax. its only an issue if the chargeable gain takes you into higher rate tax.

Flex999

Many thanks for the response, at this stage I am unsure if it is a qualifying/non-qualifying policy (long story).Basically, the policy was with one insurance company, who was then taken over and in terms of correspondence I had not received any updated information regarding the policy. The amount of monthly contributions was very small,but to my surprise there is a very large surrender value:j
Although the funds are much needed, I don't want to give 40% to the HMRC if it can be avoided, so thanks and I will contact the insurance company for more information.

magpiecottage

dunstonh wrote: »

Depends on the type of life assurance. A non-qualifying policy would have the potential to have a tax liability. A qualifying plan that has qualified would have no further tax.

They are considered to have met basic rate tax. its only an issue if the chargeable gain takes you into higher rate tax.

The law on this is quite complicated,

A qualifying policy can become non-qualifying if it is surrendered within the first ten years or the first 75% of the original term if shorter.

You then run into a thing called Top Slicing which, for a regular premium policy can be very confusing.