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why should I be charged tax on receiving my own savings?

(10 Posts)
MaryMotherOfCheeses Thu 05-Nov-09 21:21:35

I'm selling the endowment I took out on my first house. Don't need it any more, it's a bad investment, and I'd like the money to have a fabulous new kitchen.

I've been told I may have to pay tax on the amount.

Why??? It's my money surely.

And how would that be calculated?

choccyp1g Thu 05-Nov-09 21:26:47

Seems odd, because you don't pay tax on an endowment if you keep it until it pays out.

PestoPyrotechnicsMonster Thu 05-Nov-09 21:38:54

It's another incentive to keep your money in and keep it going, that's why the proceeds are tax free at maturity.

MaryMotherOfCheeses Thu 05-Nov-09 22:24:15

But why does the tax man want you to keep it in there for 25 years? What benefit it that to him.


NotaStepfordWife Thu 05-Nov-09 22:38:26

If you have held the policy for less than ten years (or 75% of the term), i think that makes it a non-qualifying' policy and therefore potentially liable to income tax on any gains made (though you may not have made any!!) - also, I think that you would only have to pay tax if you are higher rate taxpayer as you will already have paid it within the policy at the marginal rate.

I'm a bit rusty on my knowledge in this area; someone else will probably be able to confirm/challenge this view!

NotaStepfordWife Thu 05-Nov-09 22:47:27

So to answer your OP instead of rambling on (sorry!), you pay income tax on the growth of your savings, exactly the same way as you would if it was in a bank or building society. You won't pay tax on the whole amount.

But - if you've had the policy for more than 10 years, all proceeds should be tax free.

Rindercella Thu 05-Nov-09 22:53:59

Check here You may be entitled not to pay tax on your savings, depending on your circumstances.

MaryMotherOfCheeses Fri 06-Nov-09 18:35:31

NotaStepfordWife, thanks. 10 years and 4 months! smile

I'll check that out.

Thanks for the link Rindercella. I'll read that properly later.

wicked Sat 07-Nov-09 12:37:54

You are liable for tax on unearned income.

Imagine you were a millionaire and didn't work - you just lived off interest. You would expect to pay tax, surely?

If your endowment has been a profitable investment and you do not hold it for a qualifying period, you have to pay tax. You are simply selling shares.

swanseadaddy Tue 10-Nov-09 20:11:04

as long as you have had the endowment at least 7 1/2 years then there is definately no tax whether you are higher rate or basic rate

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