Talk

Advanced search

Mumsnet has not checked the qualifications of anyone posting here. Free legal advice is available from a Citizen's Advice Bureau, and the Law Society can supply a list of local solicitors.

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.

(her)

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

Join the discussion

Join the discussion

Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.

Register now