Home

  • CII Exams
    • AF Exams
    • CII AF1 Personal Tax and Trust Planning
    • CII AF4 Investment Planning
    • CII AF5 Financial Planning Process
    • CII AF7 Pension Transfers
    • CF Exams
    • CII CF1 UK Financial Services, Regulation and Ethics
    • CII CF6 Mortgage Advice
    • CII CF8 Long Term Care Insurance
    • ER Exams
    • CII ER1 Equity Release
    • FA Exams
    • CII FA1 Life Office Administration
    • CII FA2 Pensions Administration
    • IF Exams
    • CII IF1 Insurance Legal and Regulatory
    • CII IF2 General Insurance Business
    • CII IF3 Insurance Underwriting Process
    • CII IF4 Insurance Claims Handling Process
    • CII IF5 Motor Insurance Products
    • J0 Exams
    • CII J02 Trusts
    • CII J05 Pension Income Options
    • CII J07 Supervision in a Regulated Environment
    • CII J10 Discretionary Investment Management
    • CII J12 Securities Advice and Dealing
    • LP Exams
    • CII LP2 Financial Services Products and Solutions
    • R0 Exams
    • CII R01 Financial Services, Regulation and Ethics
    • CII R02 Investment Principles and Risk
    • CII R03 Personal Taxation
    • CII R04 Pensions and Retirement Planning
    • CII R05 Financial Protection
    • CII R06 Financial Planning Practice
    • CII R07 Advanced Mortgage Advice
  • CII Qualifications
    • CII Qualifications Overview
    • Advanced Diplomas
    • CII Advanced Diploma in Financial Planning
    • Awards
    • CII Award in Financial Administration
    • CII Award in Life and Pensions Foundations
    • CII Award in Long Term Care Insurance
    • CII Award in Regulated Pension Transfer Advice
    • Certificates
    • CII Certificate in Advanced Mortgage Advice
    • CII Certificate in Discretionary Investment Management
    • CII Certificate in Equity Release
    • CII Certificate in Financial Services
    • CII Certificate in Insurance
    • CII Certificate in Investment Operations
    • CII Certificate in Mortgage Advice
    • CII Certificate in Paraplanning
    • CII Certificate in Regulated Financial Services Operations
    • CII Certificate in Securities Advice and Dealing
    • Diplomas
    • CII Diploma in Financial Planning
    • CII Diploma in Regulated Financial Planning
  • Main Pages
  • Home
  • Blog
  • Corporate
  • FAQ
  • About
  • Contact
  • Home
  • Blog
  • Corporate
  • FAQs
  • About
  • Contact
Cart
Brand Financial Training
  • CII Exams
    • Exam-Col-01
      • AF Exams
      • CII AF1 Personal Tax and Trust Planning
      • CII AF4 Investment Planning
      • CII AF5 Financial Planning Process
      • CII AF7 Pension Transfers
      • CF Exams
      • CII CF1 UK Financial Services, Regulation and Ethics
      • CII CF6 Mortgage Advice
      • CII CF8 Long Term Care Insurance
      • ER Exams
      • CII ER1 Equity Release
      • FA Exams
      • CII FA1 Life Office Administration
      • CII FA2 Pensions Administration
    • Exam-Col-02
      • IF Exams
      • CII IF1 Insurance Legal and Regulatory
      • CII IF2 General Insurance Business
      • CII IF3 Insurance Underwriting Process
      • CII IF4 Insurance Claims Handling Process
      • CII IF5 Motor Insurance Products
      • J0 Exams
      • CII J02 Trusts
      • CII J05 Pension Income Options
      • CII J07 Supervision in a Regulated Environment
      • CII J10 Discretionary Investment Management
      • CII J12 Securities Advice and Dealing
      • LP Exams
      • CII LP2 Financial Services Products and Solutions
    • Exam-Col-03
      • R0 Exams
      • CII R01 Financial Services, Regulation and Ethics
      • CII R02 Investment Principles and Risk
      • CII R03 Personal Taxation
      • CII R04 Pensions and Retirement Planning
      • CII R05 Financial Protection
      • CII R06 Financial Planning Practice
      • CII R07 Advanced Mortgage Advice
      • Study Kit Box
  • CII Qualifications
    • Qual-Col-01
      • CII Qualifications Overview
      • CII Advanced Diploma in Financial Planning
      • CII Award in Financial Administration
      • CII Award in Life and Pensions Foundations
      • CII Award in Long Term Care Insurance
      • CII Award in Regulated Pension Transfer Advice
    • Qual-Col-02
      • CII Certificate in Advanced Mortgage Advice
      • CII Certificate in Discretionary Investment Management
      • CII Certificate in Equity Release
      • CII Certificate in Financial Services
      • CII Certificate in Insurance
      • CII Certificate in Investment Operations
      • CII Certificate in Mortgage Advice
      • CII Certificate in Paraplanning
      • CII Certificate in Regulated Financial Services Operations
      • CII Certificate in Securities Advice and Dealing
    • Qual-Col-03
      • CII Diploma in Financial Planning
      • CII Diploma in Regulated Financial Planning
Brand Financial Training > R03 > Unravelling the Complexities of the Taxation of Life Assurance Policies – Part 2
  • Previous
  • Next
Unravelling the Complexities of the Taxation of Life Assurance Policies – Part 2
July 3, 2018
Unravelling the Complexities of the Taxation of Life Assurance Policies – Part 2

Unravelling the Complexities of the Taxation of Life Assurance Policies – Part 2

Posted by The Team at Brand Financial Training on July 3, 2018 in R03, Taxation
Last updated on September 25th, 2019 at 4:20 am
Unravelling the Complexities of the Taxation of Life Assurance Policies - Part 2: Non-Qualifying Policies

What if you could answer CII R03 exam questions on the taxation of life assurance policies accurately and confidently? Our last article set out the conditions that make a life assurance policy qualifying, and in this article, we will explain non-qualifying policies. 

To state the totally obvious, if a life assurance policy isn’t qualifying, then it is non-qualifying.

The Main Conditions of a Qualifying Policy

As we discussed last week, these are the main conditions that make a policy qualifying:

  • the term;
  • regular premiums;
  • premium amount; and
  • level of life cover compared to the premiums paid.

Non-Qualifying Policies

This means that all offshore policies are non-qualifying by default, and also that non-qualifying policies will often be set up as a wrapper for investments, rather than purely to provide life cover. Single premium investment bonds, both onshore and offshore, are therefore non-qualifying.

Read on to find out more about the taxation of life assurance policies, specifically non-qualifying policies, as you prepare for your #CII #R03 exam. Share on X

 

Onshore Non-Qualifying Policies

Looking at onshore non-qualifying policies first, the major occasions which give rise to chargeable events are:

  • Death, if it gives rise to a benefit;
  • Maturity;
  • Surrender;
  • Partial surrender over certain limits – cumulative 5% of single premium per policy year;
  • Policy loans after 26 March 1974; and
  • Assignment for money or money’s worth.

It is a fairly comprehensive list and covers pretty much every occasion where funds are realised from the policy. The gain arising on the chargeable event arising on maturity or surrender is calculated by deducting from the amount paid out the premiums paid and the total gains on previous chargeable events. On death, the surrender value immediately before death is substituted for the amount paid out. On assignment, the price received is substituted for the amount paid out, or market value if the transaction is between connected persons. The gain is then added to the policy owner’s total income for the tax year and, if appropriate, is subject to the higher or additional rate of tax, minus the basic rate, to allow credit for life company taxation.

When Top Slicing Comes Into Play

If adding the gain to the policyholder’s other taxable income for the year means that their top rate of tax is moved up a bracket to higher or additional rate, then the dreaded (by exam candidates!) top slicing relief comes into play. The calculation involves the following steps:

  • Divide the gain by the number of full years the plan has been in force to get your top slice
  • Work out the tax on the top slice which, as the name suggests, is treated as the top slice of income for the tax year
  • Multiply the tax on the top slice by the number of full years the plan was in force – this is the maximum tax payable on the gain, so the full tax liability calculated on the entire gain less this figure is your top slicing relief. If the top slice falls fully within the basic rate band, there will be no additional tax due.

Offshore Policies

Offshore policy gains are calculated in a similar fashion but with no credit given for basic rate tax, as the offshore life company hasn’t paid UK tax on its income and gains.

Grab the resources you need!

If you’re studying for your CII R03 exam, and you are determined to pass, practising will help you to achieve that. Grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the R03 calculation workbook taster now!

Click here to download our free calculation workbook taster for CII R03

 

Tags:calculating gain rising from chargeable events, non-qualifying life assurance policies, Personal taxation, taxation of life assurance policies, top slicing relief

Related posts

  • Brand Bitesize: Residence Nil Rate Band (RNRB)
    Brand Bitesize: Residence Nil Rate Band (RNRB)
  • A Clever Way of Reducing the Child Benefit Tax Charge
    A Clever Way of Reducing the Child Benefit Tax Charge
  • Inheritance Tax and Exempt Transfers
    Inheritance Tax and Exempt Transfers
  • Brand Bitesize: Transferring Nil Rate Band between spouses/civil partners
    Brand Bitesize: Transferring Nil Rate Band between spouses/civil partners

Subscribe

Get new blog posts delivered straight to your inbox!

By ticking this box you are giving your consent for us to email you when a new post is published on our blog. We may also email you with additional information and offers that we believe may be of interest to you. We take your privacy very seriously and we will never share your personal information. You can unsubscribe from our emails at any time. For information about how we handle your data, please read our privacy notice.

Please tick the box to give your consent for us to email you when a new post is published on our blog. We may also email you with additional information and offers that we believe may be of interest to you. We take your privacy very seriously and we will never share your personal information. You can unsubscribe from our emails at any time. For information about how we handle your data, please read our privacy notice at https://brandft.co.uk/privacy-policy/

Search

To search our blog just enter a keyword and click search.

Latest Posts

  • Friday Five Focus on Regulation – 5 Questions in 5 Minutes – 18 Jul 2025
    By The Team at Brand Financial Training
    July 18, 2025
  • National Insurance Employment Allowance
    By The Team at Brand Financial Training
    July 15, 2025
  • Friday Five Focus on Protection – 5 Questions in 5 Minutes – 11 Jul 2025
    By The Team at Brand Financial Training
    July 11, 2025
  • Chargeable Events on Bonds Held in Trusts
    By The Team at Brand Financial Training
    July 8, 2025

Follow us

Categories

Archives


All content © Brand Financial Training Ltd, 2008-2024. Unauthorised use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

Excerpts and links may be used, provided that full and clear credit is given to Brand Financial Training Ltd https://brandft.co.uk with appropriate and specific direction to the original content.

Contacts

Email :
Tel : +44 (0)345 680 1682
You can leave a voicemail for us but for the quickest response, please email our customer service team at the above email address, who will respond within 24 hours.

Calls are charged at the same rate as standard landline numbers. This rate will depend on your telephone provider and may be included in your tariff.

Newsletter

Stay up to date with our informative monthly newsletter tailored for you.

Learn more

We write for...

Logo: Money Marketing Logo: Professional Paraplanner Professional Paraplanner Awards 2021
Learn more

We support...

In Aid of Trussell Trust The Clothing Bank
Find out more about how we work to make a social impact.
Learn more

Home
About
Blog
Contact
Social Impact

Money back guarantee
Corporate
Help and FAQs
Learning Resource Updates

Email :
Tel : +44 (0)345 680 1682 (Voicemail only)

Calls are charged at the same rate as standard landline numbers. This rate will depend on your telephone provider and may be included in your tariff.

LinkedInLinkedInTwitter/XTwitter/X YouTubeYouTubeYouTubeYouTube

©2025 Brand Financial Training Ltd · Reg No: 7153959 · VAT No: 979 2499 45

Policies | Terms of use | Terms of sale | Privacy policy | Cookie policy