# Do You pay tax on a maturing endowment policy ?



## ChuckH

As above I have a relatively small endowment policy which im tepted to cash in ! If I do will it be taxed ???? Or is it best left in ??TIA...............................:thumb:


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## CupraRcleanR

Won't be taxed. 

How long is left to run? 
If you are still contributing you are buying cheap "units" with the market being on its ar5e. Could think of it as a little saving plan. 

You will also have an element of life cover with it that will disapear should you cash in. 

You will also be cashing in at a particularly low point so the value may be cack at present.

Also don't forget the value of your investment can go down aswell as plummet!!!


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## -ROM-

Cashing in and spending may be a bad idea but cashing in and investing elsewhere could be an alternative, as there are a lot of investment opportunities ATM that *could* make a big profit in say 5-10 years time!!!


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## robrobc

If I can remember my FPC correctly, The issue of taxation is dependent on whether the original policy was written as a qualifying policy as defined by the Income and Corporation Taxes Act 1988. Not wishing to bore you to death on this one the key is the length the policy was written over, it must be a minimum of 10 years to qualify, or it must IIRC run for 2/3rds of the Original Term if being surrendered early (although I am prepared to be totally wrong on this bit :lol
As previous posts have stated this could be an excellent way to save money going forward as you are buying at the moment when prices are rock bottom, these may well go up in the future. :thumb: If so, then you could get a sensible return on the money.
I guess it all depends on whether you need to get at the money or not.


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## S63

CupraRcleanR said:


> Won't be taxed.
> 
> How long is left to run?
> If you are still contributing you are buying cheap "units" with the market being on its ar5e. Could think of it as a little saving plan.
> 
> You will also have an element of life cover with it that will disapear should you cash in.
> 
> You will also be cashing in at a particularly low point so the value may be cack at present.
> 
> Also don't forget the value of your investment can go down aswell as plummet!!!


good to see you here:wave: would the OP also have to pay a penalty for redeeming early?


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## CupraRcleanR

S500 said:


> good to see you here:wave: would the OP also have to pay a penalty for redeeming early?


:thumb:

The OP needs to see an Adviser for a once over as there are a miriad of options:

Cash in 
Transfer
Continue
Sell on 
etc, etc.


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## robrobc

CupraRcleanR said:


> :thumb:
> 
> The OP needs to see an Adviser for a once over as there are a miriad of options:
> 
> Cash in
> Transfer
> Continue
> Sell on
> etc, etc.


I agree:thumb:


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## 1animal1

all options covered and yup take advice as there are more qualifying criteria such as premium must make up at least a certain proportion of the benefits etc, also depends what type of endowment it is, low cost, full.... etc etc

get advice on options


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## organgrinder

From a pure tax perspective whether you would pay tax is largely dependant on whether you are a higher rate tax payer or close to being one.

If you cash the policy in you will get a Chargeable Event Certificate and the gain shown on the policy will be added to your income for Income Tax purposes. Very simply, if you have paid £5000 into the policy and it is now worth £9,000 you have a gain of £4,000. Add this to your income and if it takes you into higher rate tax you will have a liability. If not you won't.

The liability won't be anything like £4,000 at 40% but will be reduced depending on a number of factors including how much it takes you into higher rates and how many years you have had it - you would need the paperwork after the event to calculate an accurate figure but the above should give you a pointer.

Whether it is a good time to sell or not I will leave up to you.


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## 1animal1

organgrinder said:


> From a pure tax perspective whether you would pay tax is largely dependant on whether you are a higher rate tax payer or close to being one.
> 
> If you cash the policy in you will get a Chargeable Event Certificate and the gain shown on the policy will be added to your income for Income Tax purposes. Very simply, if you have paid £5000 into the policy and it is now worth £9,000 you have a gain of £4,000. Add this to your income and if it takes you into higher rate tax you will have a liability. If not you won't.
> 
> The liability won't be anything like £4,000 at 40% but will be reduced depending on a number of factors including how much it takes you into higher rates and how many years you have had it - you would need the paperwork after the event to calculate an accurate figure but the above should give you a pointer.
> 
> Whether it is a good time to sell or not I will leave up to you.


This is all assuming that it isnt qualifying, which it may well be (you NEED to find out)..... if isnt you'll have to do a top slice calculation if the said 4k takes you over a higher rate tax band...although if you are a basic rate payer id assume that this would be taxed internally via corporation tax negating any liability for a basic rate tax payer anyway....as most Uk domiciled with-profits funds are....


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## ChuckH

To be totaly honest I had completely forgotten about the policy !! Surrender value is £3700 the monthly payments are only just over a fiver Which is why it was so easily lost/overlooked ! Maturing date is 2017 When it will be worth between £5200 Worst and £6300 at best according to the Royal 
Londons forecast. It was taken out in 1983 !! Life cover is £2000

So should it be surenderd or left alone to mature ??????????????? TIA..:thumb:


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## organgrinder

If the lower return figure really is the minimum you will get, then the policy appears to be returning about 4% p.a. which is not far away from the best bank and building society rates.

If you can put the money into something that gives you more than 4% (e.g. reduce your mortgage if you are paying at 5% or 6%) then it might be worth cashing it in but otherwise if you have no specific plans, it doesn't look as though you will be losing anything by leaving it where it is and if you get the higher figure in 8 years time it will be a very pleasant surprise and a big enough sum to let you do something worthwhile.

You also have £2k life cover which might not be much but it is £2k more than your dependants would have at a difficult time, if you cash the policy in.

With those sums, I wouldn't give tax a 2nd thought.


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## 1animal1

yup i agree, keep it going and for the sake of a fiver...... not worth stopping


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