Foreign Insurance Termination Gain Calculation

Dear team, I have read through HS321 for the guideline of Gains on foreign life insurance policies, however I still want to clarify some calculations. Ten years ago I purchased a foreign insurance (for life / accident) in Hong Kong and at that moment I was a Hong Kong residence. Then around 1.5 years ago I moved to UK and become UK tax residence. Then few months ago, I have cut off the insurance, the insurance company paid me back a sum of money for termination, but I did not have any gain, because the total amount I have paid for the policy is equal to the total amount I get back from the insurance company (for example, total paid HKD 10000, total received HKD 10000, gain is HKD 0) 1. If I need to declare anything in the self assessment for this policy? 2. If I need to convert the money I have paid and received from HKD to GBP (I pay for the insurance monthly, but the money received is a cheque once and for all), before calculate the gain / no gain? 3. If I have to calculate the gain in GBP, should I just calculate the part AFTER I become UK tax resident in proportion? (If this is the case, the gain in HKD should still be HKD 0?) Thanks.

Hi,

On full surrender of the policy, you may receive a certificate from the policy provider, showing if there is a gain. This gain would be shown on SA106 in pouds sterling, in the tax year the gain arises. The official exchange rates can be found at:

Exchange rates from HMRC in CSV and XML format

To convert from a foreign currency to pounds sterling, please use the official rate of exchange at the time of the exchange. You are free to use the yearly rate, the monthly rate or the spot rate.  If a conversion was undertaken to deposit the money into a UK bank account, then this figure can be used. If there is no gain, there is nothing to report.

HS321 Gains on foreign life insurance policies (2023)

Thank you.

Hi team, may I ask a follow up question? When calculating the gain, according to the rule of Time apportioned reductions, should I just calculate the part AFTER I become UK tax resident proportionally? Is there any difference between policy that was issued before 6 April 2013 and after 6 April 2013? Thanks.

Hi EMdriver,

Please refer to the guidance at: IPTM3730 - Foreign policies: reduction for non-UK policyholder

Thank you.