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Where Taxpayers and Advisers Meet

Foreign Life Insurance Gains problem

Joined:Tue Oct 29, 2013 5:07 pm
Foreign Life Insurance Gains problem

Postby DerekMoore » Tue Apr 06, 2021 7:39 pm

My Auntie has been making withdrawals from her foreign insurance policy to supplement her pension and has received a letter informing her of the total gains of £7,500 which the letter says is taxable.

I discovered this policy was sold to her by the bank IFA and it is one of those policies where you can withdraw 5% of the premiums without having a tax bill over 20 years. Something she said she wasn’t aware of.

Unfortunately, as she did not understand this, she withdrew more than the 5 % over the last 5 years,

The letter from the Irish Company says a taxable gain of £7,500 has been made.

This according to the letter this is over 5 years for slice relief calculations. I assume this would mean the £7,500 / 5 = £1,500

Her basic income before any withdrawals is around £9,500 per annum so any gain of £1,500 per annum would fall within the personal allowance and not be taxable I believe. Whereas the £7,500 in full would result in a tax charge.

Trying to talk to HMRC is like talking to the Kremlin, no one answers, and all the local offices are now shut.

To the Question: Does this mean that the gain of £7,500 is charged to tax in the preceding 5 years for slice relief calculations i.e. at £1500 per annum or is the whole amount of £7,500 is chargeable to tax in the last year of 20/21 when the chargeable event certificate was issued.

Any advice would be appreciated as its not something I have come across before.

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