Scottish Widows Personal Investment plan - gifted by late father, tax implications?

NiceGuy001

Hello, I hope somebody can help with this.

My father transferred a Scottish Widows PIP (Balanced Growth Life policy) into my name shortly before he passed away in October 2025 - the value was approx £75k at the time and is now valued at £77.7k. When my father transferred this to me, it was to be split 50/50 with my brother, who lives in Thailand.

I want to cash in £50k and transfer half of the current value to my brother, I'm confused as to whether there will be any tax implications in doing so? I included the total on the IHT403 form when submitting the IHT400 and other forms, there is no IHT due on te estate as it is below the threshold.

I earn £52k P.A. if that helps. Will I have to pay any tax?

FrugaiMacDugal

Was it stipulated in his will what was to be done with the PIP?

NiceGuy001

https://forums.moneysavingexpert.com/discussion/comment/81899075#Comment_81899075

No, there were other investments which are included in his will, which I will distribute in accordance with his wishes (as I am the executor of the estate).

This was transferred to me prior to his passing, with a verbal agreement that I would transfer 50% to my brother - he wanted this separate to the rest of his estate.

Thanks for your reply.

FrugaiMacDugal

Did the transfer of £75k PIP bring the estate value below the IHT £325k?

NiceGuy001

I claimed the residence nil late band using form IHT435 and the unused residence nil rate band from my late setpmother using form IHT436, as my father was a widower - so the total for the IHT threshold is £1million from my understanding (property valued at £650k). The total estate value, including the value of this gift, is just under £900k, meaning no IHT should be due as far as I am aware.

Does this answer your question?

DRS1

Is this guide for the right thing?

Scottish Widows & Halifax Personal Investment Plan | Scottish Widows

There are people on here like @poseidon1 who understand how these things are taxed and maybe whether there is a better way of getting 50% of the plan to your brother.

It seems you may be able to take 5% a year but I don't know if that means if you haven't taken anything for 10 years you can suddenly take 50% because all those 5%s mount up or whether it is just 5% in the year you take it and 50% is well over that.

NiceGuy001

Hi DRS1 - yes, that is the guide to the correct thing.

I'm worried asbout makling a withdrawl and transferring it to my brother, in case I suddenly get stung by HMRC. The alternative is a deed of assignment and gifting him 50% of the policy (that is a right pain, trying to get signed and verified documents and witnesses given he lives thousands of miles away), and then he can deal with any issues of withdrawing from that policy.

Nothing seems straightforward lol, I think I may have to bite the bullet and speak to a tax advisor.

I thought I had read that your policy could earn £3k profit PA without it affecting anything, as this was only transferred to me in October it seems to have muddied the waters.

DRS1

Hopefully someone who knows more than me will be along soon. From your point of view an assignment might be better but who knows what your brother's tax treatment might be in Thailand. If you did cash 50% of it in would he be happy for you to set off any tax you have to pay against the proceeds?

poseidon1

@DRS1 helpfully located the link to the SWID product, and drilling down into the key features revealed the following guidance -

https://adviser.scottishwidows.co.uk/assets/literature/docs/53496.pdf

Therein, Scottish Widows identifies this policy as subject to the UK 'chargeable event ' income tax regime.

This means the gain accrued over the entire exsistence of the policy is potentially subject to income tax if the gain when added to the policy holder's other income pushes them into higher rate income tax.

At this point OP you have insufficient data to determine a potential chargeable gain.

You need:

• Date Your father originally bought the investment
• What withdrawals he may have made in his lifetime
• What are the residual gains now embedded in the value of the policy

Please note the value of the policy when gifted to you has no relevance. There was no market value uplift to the policy as a result of the gift, you 'inherit' the entire past history of the policy as if you were the one that acquired it from outset. Furthermore this is outside the CGT regime so £3,000 exemption equally irrelevant.

Scottish Widows should be able to provide you with all the relevant past history and give you a idea of what the current chargeable event gain might be on a hypothetical basis.

You mention you earn £52k ,so if you are English tax resident you already fall into the 40% tax threshold which would trigger an income tax liabilty on the gain at your highest rate. However against that liabilty there should be a 20% tax credit allowance on the basis the policy was an onshore variant taxed in the UK at source.

You mention assigning a half share to your brother for him to sort out any Thai tax exposure on his future encashment. This maybe sensible, since from what I have seen of the Thai tax regime for ex pats, he may have an opportunity to avoid domestic tax on his own remittance.

Given the complexities of the policy bond regime, together with your brother's non uk tax resident status, good idea to get professional advice.

In the meantime the following article may give you further insight into what you are dealing with-

https://techzone.aberdeenadviser.com/public/investment/Taxation-of-bonds

NiceGuy001

https://forums.moneysavingexpert.com/discussion/comment/81899666#Comment_81899666

Thank you so much for this reply, it is very helpful indeed! I'm glad that you have replied with this info, as I was feeling under pressure to just withdraw and send to my brother.

I do know that my father took the policy out in 2011, so it is about 15 years old, and he never made any withdrawals from any of his policies. Unfortunately, I do not know how much he initially invested, however the fund has performed well and has increased quite significantly over time.

Thanks for the link, I'll read that now and then seek further professional advice. Really appreciate your comment, thank you once again.