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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5143
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My wife and I have an Investment Plan held in joint names purchased

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My wife and I have an Investment Plan held in joint names purchased with a single premium of £25000 in January 1996. From time to time since we purchased the Plan we have taken money out i.e surrendered part of the Plan. Recently we took more money out ( and this means we have now taken out more than the original amount of £25000). We have now receieved a letter from the Assurance Society which says. "We enclose your chargeable event certificate. We are required by HM Revenue and Customs (HMRC) to send you this certificate as the value you surrendered the policy greater than the amount you originally invested with us. The gain is the amount on which you may have to pay income tax depending on your personal tax position". The Certicate we have received is headed 'Certiicate Relating to a Chargeable Gain. Reference is made to the provisions of Section 552 Income and Corporation Taxes Act 1988. I pay tax at the basic rate and my wife is not a tax payer as her only income is her fairly small state Retirement Pension of £3278 per annum. As my wife is a named Joint holder of the Plan can this enable us to avoid paying any tax? In other words does my wife's no-tax position help in any way?

and welcome to the site. Thank you question.

Please advise what figure is shown as chargeable gain.

Many thanks

Customer: replied 3 years ago.


Richard, thank you reply.

A gain ashown on a chargeable gain certificate is treated as taxable income and added to your other income.

There is no effect on your tax liability unless you are taxable at the higher rate.

You have advised me that you are basic rate tax payer and that your wife is not a tax payer.

As it is a joint policy, your share of the gain is (2431/2) £1,216.

The gain already carries a notional tax credit at basic rate. Individuals are treated as having paid income tax at basic rate on a chargeable event gain.

More information on this can be found in HMRC helpsheet 320 here (look at Tax on Page 2)

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Thank you so far. I should like to take a little time what you have said and I will not be able to do this until tomorrow. I will then get back to you either to confirm I am satisfied and no further requirement from you - or to ask question. Is this ok.?


Richard, thank you reply.

Please take your time.

I await further news from you.

Many thanks
Customer: replied 3 years ago.

In your full reply you say "The gain carries a notional tax credit at basic rate. Individuals are treated as having paid income tax at basic rate ona chargeable event gain". Can you explain what this means in 'layman' words. Wait to hear from - but thanks already help you are giving me.


Richard, thanks reply.

Basically, it means that if the taxpayer is not liable to income tax on his total income at any rate above the basic rate, he will thus pay no tax on the chargeable event gain as it has been accounted the investment company at the basic rate.

It is like the tax credit on dividends paid to individuals. So long your total income stays within basic rate band you don't pay any tax on dividends paid to you.

I hope it is helpful.

Customer: replied 3 years ago.

Thanks very much. Just one further question which I hope is not asking too much of you. My gross income current tax year ending 5 April 2015 will be £35484 - made up by an Occupational Pension of £29276 and State Retirement Pension of £6208. My PAYE Coding Notice shows my Personal Allowance as £10000. HM say in the Coding Notice " We think the amount of State Pension or other taxable State benefits you will receive this year is £6208. The State Pension or State benefit is taxable so we have used £6208 of your tax-free allowance because the Department and Pensions cannot take tax off you payments". My Pension Scheme use my tax code 379L to work out how much tax to deduct. Given this information could you give me an indication of how much I could take out of my Investment Plan before being liable to pay tax - my understanding now being that no tax payable until I move from the basic tax rate to the higher rate.

Thank you again help.


Richard, thank you reply.

You will not have to pay any tax on the chargeable event gain if your total income inclusive of the gain is less than £41,865 in the current tax year.

So you could take £6,381 as chargeable event gain(41,865-35,484) before you go into higher rate band.

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited . and other Tax Specialists are ready to help you
I thank you my answer.

Best wishes.
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Best wishes.