Endowment tax liability

By THIS IS MONEY
Updated:

 

A QUERY from 16 Oct, 2000 about buying traded endowment policies quotes Tim Villiers of the Association of Policy Market Makers as saying 'The payout is tax-free if you prepare properly, so take tax advice before buying'. How do you prepare properly? Can you explain how I can reduce my tax liability? MA, Maidenhead.

Maurice Fitzpatrick, a tax director at Tenon plc says: Its true that if you buy a policy from the original owner and then receive the proceeds or sell it on you may face a capital gains tax liability on the difference between what you paid for it plus the premiums you paid into it on the one hand, and the proceeds from it on the other.

In some cases there may be an income tax liability too.

There are various schemes that may be able to help you avoid these liabilities but they are very complex - too complicated do be tackled on a DIY basis or even explained here.

In this case you really do need an accountant, lawyer or independent financial adviser to help you.

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