Taxation on Life Insurance Surrender

I have recently surrendered a Whole Life Insurance (Unit Linked Plan) Policy to receive a capital redemption sum. I am the Policy Holder and Beneficiary, having held the policy under its original terms, without amendment, for 41 years, paying monthly premiums throughout the period. My insurer has informed me that there is no need for a Chargeable Event Certificate to be issued as this was a Qualifying Policy and as such " the qualifying status relates to the potential income tax liability payable in respect of a chargeable event. As this was a qualifying policy, no income would be due". As part of the redemption the insurer has provided me with a statement of the total premium sum paid into the policy and the surrender value. I have two questions, i) Am I correct in my understanding that the capital sum I have received is not income and is consequently not liable for income tax and therefore does not require to be included in my Self-Assessment return ? (ii) If there is liability, as a higher rate tax payer does this make any difference ?

Hi Cledwyn Davies,
As you  have stated that the policy is a qualifying policy then no chargeable event gain arises and the income received is not taxable, irrespective of your income.
Thank you.

I have a modest Life Assurance policy ( £5k) that I plan to surrender , this was set up as a partnership insurance 48 years ago so there is a trust attached. having read the HMRC advice e.g. 'Trust Registration Service Manual' etc it would seem that as the policy is a basic low cost policy, and there will be no funds left in the trust, based on Sch 3A ( 4) , that this trust does not need to be registered. ? My main question is whether the surrender value would be taxable and require completion of a Self Assessment form ? Thank you in advance.

Hi Alan Redford,
If the life assurance policy, is a qualifying policy, then it will not be taxable and there is nothing more that you need to do.
Most life assurance policies are qualifying policies, but you would be best place to check this with the policy provider, as they will know if it is qualifying or not.
When policy is surrendered, you will receive a chargeable event certificate.
For non qualifying policies, you would send the certificate to HMRC to check if further tax is due, but if you have to complete a tax return, you would declare it there.
Thank you. 

 

Hi, What is a qualifying policy in the UK? Can the life assurance policies issued in Hong Kong be the qualifying policies? Thank you in advance.

My parents have just surrendered an investment bond with Sterling after 23 years. Paperwork gives details of the date of surrender, ‘chargeable event’, the amount of the gain etc. Then it says ‘Tax treated as paid’ - does this mean that they have to pay this whole amount in tax, or pay tax on this amount, or that tax is not due. The information given by Sterling regarding this is very confusing. Will this be dealt with on their self assessment submission for 24/25 or can it be paid earlier to clear their tax obligation?

Hi, I have recently surrendered a Whole Life Insurance Policy to receive a redemption sum. I am the Policy Holder and Beneficiary. This policy started from 2013 and it is 18 years term policy, I surrendered it at around 12 years. I paid the policy monthly from 2013, total I paid around £120,000, and the surrendered redemption sum is only around £66,000, which included: 1- Terminal Dividend (around £1,300) 2- Cash Surrender Value (around £46,000) 3- Dividend (around £700) My main question is whether the surrender value would be taxable and require completion of a Self Assessment form? Thank you in advance. Hoi

Hi UKHC,
Please refer to HS321 Gains on foreign life insurance policies (2024).
Thank you.

Hi TopTaurus,
The tax treated as paid is notional tax already deducted on the gain.
Additonal tax will only be due if they are liable to tax at higher rate.
Please see here:
HS320 Gains on UK life insurance policies (2024) Updated 6 April 2024
Thank you. 

 

Hi, Hoi,
As it is in excess of £10,000, yes
Thank you. 
 

Hi there, Sorry that I made a mistake on the amount and the money currency, and that is a foreign whole life insurance policy, so I really need you help and advice again, sorry for bothering you, and thank you for your help again. I have recently surrendered a foreign Whole Life Insurance Policy to receive a redemption sum. I am the Policy Holder and Beneficiary. This policy started from 2013 and it is 18 years term policy, I surrendered it at around 12 years. I paid the policy monthly from 2013, total I paid around HKD $120,000, and the surrendered redemption sum is only around HKD $66,000, which included: 1- Terminal Dividend (around HKD $13,000) 2- Cash Surrender Value (around HKD $46,000) 3- Dividend (around HKD $7000) My main question is whether the surrender value would be taxable and require completion of a Self Assessment form? Thank you again. Hoi

Hi,
Please refer to guidance at: HS321 Gains on foreign life insurance policies (2024).
Thank you.

Hi My wife and I have just surrendered a UK life insurance policy. We are told this is 'Non-Qualifying'. We have been sent a Chargeable Event Certificate. We are tax resident in New Zealand. Is this a matter for us to declare to the Inland Revenue in NZ (we declare overseas income including gains made on the now closed policy every year), do we need to contact HMRC (if so, how), or will HRMC contact us? Thanks for any advice. Just trying to do the right thing. 

Name removed admin .

Hi HMRC Admin 21 Response, I checked the website you provided, and saw a part of: 21. Loss, or no gain, on the policy. Mine is loss as well, so I no need to do anything, am I correct? Since I just been UK around 2.5 years, so really not sure about the tax policy, please give some advice for help. Thank you so much.

Hi Billy,
Please refer to guidance here:
Tax on your UK income if you live abroad
Thank you. 

Hi,
No, you do not declare.
Thank you.

I own a non-qualifying insurance policy on my father's life. I'm told that it became non-qualifying when it was tranferred to me upon my mother's death. My understanding is that a chargeable event certificate will be generated if I surrender the policy. Will this also be the case if I don't surrender the policy and claim the death benfit? Can I transfer ownership of the policy to my wife, who currently has no earnings and hence has an unused personal tax allowance? Presumably if she becomes the policy owner and then surrenders it, less tax would be payable. Thanks.