Tax on matured endowment?

TrickyDicky101

Juliet68 wrote: »

It was taken out with Norwich union (and think at one stage was CGU?)
Norwich union amended the policy after 5 years when they realised that the end date of the endowment was 3 months after the date of the mortgage (as they didn't start taking the premiums on time). But it still had 20 years to run and they amended it as it was their error.

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It may be that this change has been recorded as rendering the policy non-qualifying. You do need to get them to confirm or deny this.

Have you quantified what your gain will actually be (in case it is chargeable) based on premiums paid/projected (or actual) maturity value?

Juliet68

Yes the gain is on the chargeable certificate that they have sent. If the gain is treated as income then I think it will mean I have pay more tax st work as well (unless I can do the top slice relief).

Juliet68

I have found a letter which Norwich Union sent me when they sent me the amended policy. They say "we will pay any income tax which arises directly attributable to the changes we have made. Please attach this letter to your policy and produce it to us in the event of any income tax being payable"

So if they don't manage to make the policy qualifying (and as I have paid it for more than 10 yrs after the change was made) I am assuming that they will pay the tax on the gain and the additional income tax I will be charged through work?

Juliet68

If the policy ran for 20 years after the change they made, would that make it qualifying?

TrickyDicky101

Juliet68 wrote: »

If the policy ran for 20 years after the change they made, would that make it qualifying?

No - as far as I am aware once any change renders a qualifying policy non-qualifying then that's it - it is then non-qualifying.

Juliet68

Bother. Good job I have the letter saying they will pay the income tax then though it's hassle I could do without.

Juliet68

HMRC have explained top slicing relief to me. It looks like I will only have to pay tax on 2 years (as I was in the higher rate band last year and will probably be this year) so it's a small amount. But I will still be getting Aviva to pay me back if the policy turned non qualifying due to their change.

dunstonh

Juliet68 wrote: »

HMRC have explained top slicing relief to me. It looks like I will only have to pay tax on 2 years (as I was in the higher rate band last year and will probably be this year) so it's a small amount. But I will still be getting Aviva to pay me back if the policy turned non qualifying due to their change.

The chargeable event happens on a given date. It is your tax status in the year of that event that matters. Not historic years.

Juliet68

Oh that's even better then. I will only pay the extra 20% tax on the amount which is the gain / 25 years. And I only pay it if I am a higher tax payer in this year (which I may not be).

BoGoF

Juliet68 wrote: »

Oh that's even better then. I will only pay the extra 20% tax on the amount which is the gain / 25 years. And I only pay it if I am a higher tax payer in this year (which I may not be).

So are you saying that you could possibly be a higher rate taxpayer this year without the gain being taken into account?