Tax on surrendering a savings plan
I have a question regarding what tax I pay on surrendering a regular life assurance savings plan. It is a whole of life insurance policy which I can stop at any time, it has no fixed term, however if I stop payments then it will be closed and paid out.
Currently, and from the start, I have paid in £70,000.00 (in a selection of investment funds) and the value of the plan is now £145,000.00 which means there is a profit of £75,000.00. First question is, is this classed as capital gains tax? if not, what would it be classed as for tax purposes. I assume this would not be classed as an income for the tax year?
So, would my current earnings affect how much tax I pay on the £75,000.00? If that is the case, then my contracted salary is £54,000.00 (higher rate) but my combined employer/employee pension contributions are deducted as salary sacrifice and add up to £7200.00 per year thus reducing the £54,000.00 to £46,800.00 (basic rate). Am I now classed as a basic rate (20%) tax payer or higher rate (40%) tax payer given that I pay pension contributions as salary sacrifice and would I then pay tax on the £75,000.00 profit based on this.
I would like some advise on this before considering whether to surrender the policy or not and wait for future changes to government policies that may sway my decision. My aim is to invest this into my pension but I would have to do this over a few years due to the annual pension limitations.
Any advice would be helpful, and please correct me if I have assumed anything that is wrong, thanks