Life Policy Encashment - May Give Rise To Tax

ijrussell

Hi

I recently cashed in a Life Assurance policy I held with St James Place. The policy was in joint names with my wife.

I've replaced it with 2 separate term policies which are about half the price.

So, I've just received a cheque for approx 6800 pounds.

I'm a high rate tax payer, my wife isn't (isn't a tax payer at all as she doesn't earn anything!)

Will I have to declare the money and pay any tax on it? Surely it is not ALL a gain - I've been paying in for over 10 years about 75-80 pounds a month on average.

Thanks in advance

Ian

Elaine_Wilson

If you need to declare anything you would receive a "chargeable event certificate" from the insurance company.

On a surrender only the actual gain is liable to be taxed. If you have paid, say, £75 a month for 10 years then you have paid in £9,000 and there is no gain.

dunstonh

Will I have to declare the money and pay any tax on it? Surely it is not ALL a gain - I've been paying in for over 10 years about 75-80 pounds a month on average.

You are deemed to own a 50% share so will have to pay higher rate tax on half the chargeable gain. Your wife pays nothing.

The provider will send a chargeable gain notification telling you the amount if it exists.