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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have interest from a defined returns policy can I set the

Customer Question

I have interest from a defined returns policy can I set the interest against my capital gains allowance?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
, I'm Keith and happy to help you with your question.
Could you please advise exactly which sort of policy to which you refer? Then I can frame an appropriate answer.
Customer: replied 2 years ago.

I had a Barclays defined returns policy, over 3,4 and 5 years. I have read that I should be able to 'use capital gains tax annual exemption to eliminate the tax charge on my returns'!

Expert:  bigduckontax replied 2 years ago.

According to Barclays this is interest subject to Income Tax (IT). This being the case it would not be allowable against your Annual Exempt Amount Gains Tax (CGT) purposes. The two taxes are entirely separate regimes.

If you have made a gain on these policies then the gain is taxed under the IT regime and not under the CGT. The situation regarding tax on insurance policy gains is extremely complicated and you can read chapter and verse here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323767/hs320.pdf

However, here is the key extract:

'Gains In these notes ‘gains’ are chargeable event gains which are sometimes referred to as ‘chargeable gains’. They are taxable as income and included in income purposes, including entitlement to personal allowances (including age-related allowances) and tax credits. They are not capital gains, so capital losses and the annual exempt amount cannot be set against them.'

This rather regrettably scuppers your ideas as the moneys received, be they either interest or gains, come under the IT regime.

I am so sorry to have to rain on your parade. Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes!

Customer: replied 2 years ago.

I am rather puzzled as to Barclay's response! As it is in their pamphlet, relating to this policy; that 'The plan's potential returns are treated as capital gains rather than income puposes'?

Expert:  bigduckontax replied 2 years ago.

Well, I am sorry to say that HMRC does not agree. They may be in error, of course, but then so might Barclays. I would be inclined to write a letter of enquiry to your tax office. If you are running up against the 13/14 filing deadline then put it in as an estimated figure, annotate it and sort it out in slow time later.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you support.