Advice re; potential tax on endowment pay out?

[RichB]

Chaps,

I have what I hope is a quick question; I have an interest only endowment mortgage backed by an endowment and the policy is due to mature next month (yippee). It was for £90k but it will mature at approx £74k (which is better than I expected given the track record of endowments). In the documentation I have just received it says that I may be liable for tax on any gain if I am a higher rate tax payer, which I am.

Doing some research on Google (always dangerous) I have read comments that tax will not be payable if the policy has run for more than 10 years or 75% of its duration - it has gone the full 25 years term. I've also read about "top slicing" and "chargeable events".

So now I'm confused and thought it best to turn to my friends on Pistonheads! The policy has run 25 years, will pay out £73k against an expected value of £90k and I am a higher rate tax payer. Will I have to pay tax and if so how do I calculate roughly much?

Thanks Rich...

[Eric Mc]

The NORMAL situation is that the capital sum payout will NOT be taxable if it was allowed to run its natural length. If you cashed it in earlier, it might have become a "taxable event" and would have been subject to Capital Gains Tax.
From what you are saying, I would think it IS NOT taxable.

It sounds to me that the literature you are reading might be typical cautious prose designed to cover their asses.
I would phone the policy holders just to check the current tax situation, to be sure.

[RichB]

Thanks Eric, appreciate your quick reply...

[Deva Link]

There's no tax to pay.

Mine is just about to mature, hope it does as well as yours - relatively, as mine's only for £30K. £90K from 25yrs ago - you must have a massive property!

[RichB]

Deva Link said:

£90K from 25yrs ago - you must have a massive property!

Thanks for the reassurance - and not really, 4 x bed detatched, Maidenhead, was £125k back in 1986

[chimster]

RichB said:

Thanks for the reassurance - and not really, 4 x bed detatched, Maidenhead, was £125k back in 1986

Yep mine was a 4 bed detached in Crowthorne and mine has 4 years left to run but it started at £100k and its now down to £50k. You have done well.......

[Deva Link]

RichB said:

Deva Link said:

£90K from 25yrs ago - you must have a massive property!

Thanks for the reassurance - and not really, 4 x bed detatched, Maidenhead, was £125k back in 1986

Gulp! Mine (in Cheshire) was £32,500.