Tax on encashment of single premium policy

[jaycee 2200]

I have recently encashed a single premium policy and had 23% tax deducted. Why 23% and do I have to declare the encashment on my 2005 Paye Tax Return and will I have to pay more tax. I currently pay 42%.

 

[ClubMan]

Investment policies are generally taxed at standard rate income tax (20%) plus 3% = 23% on any growth earned over the investment term and there is no further liability for tax on this.

 

[oysterman]

One caveat here is that, to the best of my knowledge, foreign policies are liable to CGT at 40 (not 20) per cent.

This must affect a lot of returned emigrants from the UK who bought houses with endowment policies which they did not cash in on sale.