"Income and Corporation Taxes Act"
Discussion
Quick question, hopefully with a quick answer.
Mrs 2B and I took out an endowment policy some long time back to cover the costs of a mortgage on a flat we purchased. We still have the flat but have no more need for the policy.
It is a poor investment as the return has been lacklustre. I'd like to take the cash out and put it into something that will do better. The policy provider have written to us to tell us (and I quote) "We can confirm that when this policy was taken out it was classed as 'Qualifying under the terms of the Income and Corporation Taxes Act. As the policy has run over 10 years, if it was terminated now, there would be no liability to Income Tax on the profits".
I understand this to mean that if we cash in the policy there would be no income tax payable on the gain but why is this income tax and not capital gains tax? Would we declare the increase in value (i.e profit) as income or as a capital gain on tax returns? And, if the latter, would there be tax to pay on it? We have both used up all of our CGT allowance this year so would rather it didn't qualify for the latter.
All help welcomed, thanks.
Mrs 2B and I took out an endowment policy some long time back to cover the costs of a mortgage on a flat we purchased. We still have the flat but have no more need for the policy.
It is a poor investment as the return has been lacklustre. I'd like to take the cash out and put it into something that will do better. The policy provider have written to us to tell us (and I quote) "We can confirm that when this policy was taken out it was classed as 'Qualifying under the terms of the Income and Corporation Taxes Act. As the policy has run over 10 years, if it was terminated now, there would be no liability to Income Tax on the profits".
I understand this to mean that if we cash in the policy there would be no income tax payable on the gain but why is this income tax and not capital gains tax? Would we declare the increase in value (i.e profit) as income or as a capital gain on tax returns? And, if the latter, would there be tax to pay on it? We have both used up all of our CGT allowance this year so would rather it didn't qualify for the latter.
All help welcomed, thanks.
To paraphrase Father Ted, "That would be an Income Tax matter" - rather than a Capital Gains Tax matter. There are some classes of gains on investments (usually insurance or pension based) which are covered under Income Tax rules rather than Capital Gains Tax rules.
Cashing in of endowments are classified as "Chargeable Events" which are dealt with under Income Tax.
The whole area can get very complex because some investment vehicles wander between the two tax codes depending on timing of disposal and size of proceeds on disposal.
Cashing in of endowments are classified as "Chargeable Events" which are dealt with under Income Tax.
The whole area can get very complex because some investment vehicles wander between the two tax codes depending on timing of disposal and size of proceeds on disposal.
Eric Mc said:
To paraphrase Father Ted, "That would be an Income Tax matter" - rather than a Capital Gains Tax matter. There are some classes of gains on investments (usually insurance or pension based) which are covered under Income Tax rules rather than Capital Gains Tax rules.
Cashing in of endowments are classified as "Chargeable Events" which are dealt with under Income Tax.
The whole area can get very complex because some investment vehicles wander between the two tax codes depending on timing of disposal and size of proceeds on disposal.
I think you're actually paraphrasing Father Jack there?Cashing in of endowments are classified as "Chargeable Events" which are dealt with under Income Tax.
The whole area can get very complex because some investment vehicles wander between the two tax codes depending on timing of disposal and size of proceeds on disposal.
Eric Mc said:
To paraphrase Father Ted, "That would be an Income Tax matter" - rather than a Capital Gains Tax matter. There are some classes of gains on investments (usually insurance or pension based) which are covered under Income Tax rules rather than Capital Gains Tax rules.
Cashing in of endowments are classified as "Chargeable Events" which are dealt with under Income Tax.
The whole area can get very complex because some investment vehicles wander between the two tax codes depending on timing of disposal and size of proceeds on disposal.
Thanks Eric. It sounds like this is therefore on the 'Income Tax' side of the line. Cashing in of endowments are classified as "Chargeable Events" which are dealt with under Income Tax.
The whole area can get very complex because some investment vehicles wander between the two tax codes depending on timing of disposal and size of proceeds on disposal.
Do we need to declare this on a tax return? If so then how? Or can we just leave it off?
Thanks for your input - it's appreciated.
If it's a "Chargeable Event", then yes, it should be included in your Self Assessment tax return in the relevant section.
Indeed, if it was a Capital Gains Tax matter, then that too would also need to included in the Capital Gains Tax supplementary pages on the Self Assessment tax return too.
Indeed, if it was a Capital Gains Tax matter, then that too would also need to included in the Capital Gains Tax supplementary pages on the Self Assessment tax return too.
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