CGT on Life Insurance Product which invests in Funds

Good day HMRC team, I have been living in the UK for the past 7 years, and also been a tax resident. From 2012-2016, I lived in Switzerland where I made monthly contributions to a life insurance policy managed by Royal London 360 Insurance Company Limited. The policy then invests into funds that I can choose, such as ETF's, bonds, etc. RL360 are based offshore, in the Isle of Man. About a year into moving to the UK, I stopped making regular contributions. The policy matures in 2043 and I am not able to access the funds until then. My question is, if I change the allocation between ETF's (i.e. move money from a poorly performing fund to a better performing fund), do I need to pay any CGT here in the UK? If I sell any ETF's, would I need to pay CGT on that? Just to repeat - I am not able to access the money until 2043, I can only change the allocation of what the money is invested in. Many thanks

Hi
As this is a life insurace policy, tax would only be payable on obtaining maturity or early surrender.
 IPTM1560 (Outline of the chargeable events regime: tax charged) advises "A chargeable event gain is deemed to form part of the chargeable person’s income.
In the case of a full surrender, assignment, death or maturity the gain will be assessed for the chargeable period, tax year or accounting period, in which the event happened.
Special rules apply to part surrenders or assignments, involving the concept of an ’insurance year’ at whose end the gain is treated as arising."
Thankyou.

Thank you very much. So just that I am clear, I would not pay any CGT as the ETF's increase in value? Assuming there is no early surrender, I would only pay tax once the policy reaches maturity? If so, what is the amount of tax I would need to pay at maturity please?

Hi,

The gain from the policy will be added to your other income and taxed accordingly.  

Income Tax is charged at the rates of 20%, 40% and 45%, so the rate of tax will depend on your income level. Foreign chargeable event gains do not get basic rate tax treated as paid on them.  

You may also reduce the chargeable gain for periods where you were non resident. For future reference you might want to consider the guidance here:

IPTM3700 - Foreign policies: differences in treatment

IPTM3730 - Foreign policies: reduction for non-UK policyholder

Thank you.