Endowment maturity and income tax

NightNurse24

I have an endowment which was taken out some 30 years ago to pay toward my mortgage (I’ve since paid the mortgage off). I’ve paid the premium every month without fail. It matures this September. I had thought that as it was taken out to part pay a mortgage it was tax free. However now I’m not sure. I’ve been doing searches online and am now even more confused. I believe it’s a ‘qualifying’ policy, from what I’ve read, but one article talks about having to pay Capital Gains tax. Is that really the case for a policy which was originally taken out to pay my mortgage?

Old_Lifer

 I would expect a policy taken-out to repay a mortgage  would  be designed to be a  qualifying policy   and if  you  have  not altered  the policy in any way  and have paid the same premium each month throughout the term  ,   this will not change.     The  proceeds from a qualifying policy  are tax-free at maturity.

I was working for a Life Office when the Qualifying Rules were introduced  and  thereafter all our regular premium endowment  and whole life policies were designed to be qualifying policies. 

blue_max_3

It was actually sold with the suggestion that there would be a tax free surplus at term, after paying off the mortgage. In your case it just so happens to be 100%.

NightNurse24

Old_Lifer said:

 I would expect a policy taken-out to repay a mortgage  would  be designed to be a  qualifying policy   and if  you  have  not altered  the policy in any way  and have paid the same premium each month throughout the term  ,   this will not change.     The  proceeds from a qualifying policy  are tax-free at maturity.

I was working for a Life Office when the Qualifying Rules were introduced  and  thereafter all our regular premium endowment  and whole life policies were designed to be qualifying policies. 

blue_max_3 said:

It was actually sold with the suggestion that there would be a tax free surplus at term, after paying off the mortgage. In your case it just so happens to be 100%.

Thank you both for your replies. That’s reassuring. I have to complete a self assessment tax form annually, do you know if I still need to declare it?

dunstonh

Approx 95% of endowments were sold as qualifying plans and there will be no further tax to pay on maturity.   A very small number of providers were non-qualifying and they will be potentially subject to tax on maturity.   However, life funds are not subject to CGT.  It is income tax and only if there is a chargeable gain.   There is a relief available called top slicing relief and joint plans are split in half.  So, in reality, even if its non-qualifying, for most there would not be an tax charge unless you are higher rate.  There are ways to mitigate it too. e..g. if one policyowner is a higher rate taxpayer and one isnt, the policy can be assigned to the non-taxpayer.   However, that is getting ahead of ourselves as you believe it is qualifying.

I have to complete a self assessment tax form annually, do you know if I still need to declare it?

Qualifying plans do not need to be declared.  Only non-qualifying.

NightNurse24

dunstonh said:

Approx 95% of endowments were sold as qualifying plans and there will be no further tax to pay on maturity.   A very small number of providers were non-qualifying and they will be potentially subject to tax on maturity.   However, life funds are not subject to CGT.  It is income tax and only if there is a chargeable gain.   There is a relief available called top slicing relief and joint plans are split in half.  So, in reality, even if its non-qualifying, for most there would not be an tax charge unless you are higher rate.  There are ways to mitigate it too. e..g. if one policyowner is a higher rate taxpayer and one isnt, the policy can be assigned to the non-taxpayer.   However, that is getting ahead of ourselves as you believe it is qualifying.

I have to complete a self assessment tax form annually, do you know if I still need to declare it?

Qualifying plans do not need to be declared.  Only non-qualifying.

Thanks for taking the time