Endowment puzzle

By THIS IS MONEY
Updated:

 

I bought a second-hand endowment policy ten years ago and it matures this year. Will the proceeds be taxed? AM

Paul Ilott at the Leeds office of adviser firm Bates Investment Services, says: First check your paperwork or ask the insurer to find out if it is a qualifying or non-qualifying policy. If it is a non-qualifying policy, there could be some income tax to pay if you are a higher-rate taxpayer-If it is a qualifying policy, there will be no income tax.

As this is a second-hand policy, there might be some capital gains tax (CGT) to pay, regardless of your tax band. Higher-rate taxpayers with non-qualifying policies may receive CGT relief for any income tax they have paid. Assigning the policy to a spouse in a lower tax band will reduce a potential tax bill.

These rules do not apply to endowments that have had only one owner. In these cases, proceeds from the maturing policies incur no further tax.

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