Is tax payable when cashing in With Profits policies?

[Whoever]

Does anybody know whether you have to declare the amount you receive when you cash in a With Profits policy? (It's not a pension or endowment policy - just a straightforward With profits policy which can be cashed in at any time).

[Captain Spod]

It depends on: whether you are a basic or higher ratetaxpayer and how long the policy has been in force. If you are a basic rate taxpayer AND the addition of the surrender proceeds to your income this tax year still leaves you a basic rate taxpayer, then nothing to pay. If you are a higher rate taxpayer and the policy has been running for the shorter of ten years or 3/4 its original term, then nothing to pay. If you are a HR taxpayer, or would be when proceeds are added to this year's income AND the policy is being cashed in very early, then you will. But not much. maximum would be 20% of the total gain (proceeds - premiums paid) You should declare it anyway because the life company will as encashment is a chargeable event and they have to.