Sunny_Glesga

So how would it go if at the point lets say the year before maturity and you were to sell it to a family member, ( for a few £`s) for whatever reason. Out of the blue the following year your family member decides once its matured and paid out that they want to give your kids loads of £`s as a gift

Lets even say that they win the Lottery ( fat chance) and decide to give the kids loads of £`s what would happen to this money with regards to tax


Would the kids be liable to pay any tax on this?

Grayling

You don't pay the tax at maturity.

The ATO count annual growth as income and you are taxed on it as if it were any other income.

G

annqldau

It's bloody silly all this tax lark you've already payed the tax on your money on your wages in both countries so why they can't just leave what's yours as yours.

MartinLuther

Not sure about your scenario, but I've wondered about whether this one sails just the right side of the law. (Note: don't get you kids involved in tax avoidance in Aus, because they pay a higher rate of tax on unearned income.)

Before leaving the UK, you pre-pay your endowment and then sell it to a relative, for a notional amount. The ATO has no claim on the yearly increase because you no longer own the endowment. On maturity the relative gifts the money to you. Gifts are not taxed in Aus, but the UK has a £6k limit per year (although typically you can gift £12k in the first year because you can use any unused allowance from the previous year).



DISCLAIMER: This is not tax advice in anyway. If you where to carry out this scenario and end up in jail then it's your own fault. Take responsibility for your actions rather than trying to blame someone else for being stupid and pissing off the authorities.

PS: this is not aimed at you, Sunny_Glesga.

MartinLuther

I'd be quite happy if the government didn't tax income from investments. Although I probably wouldn't be happy if I earned all my money from wages.

Sunny_Glesga

if i were to really think about the situation with the Endowments i have running then i would have to say that i know nothing about how they work other than i give them my money and over a period of 25 years they give me my money back plus a good bit more! ( Hopefully)

Now, lets say that i were to stay in the UK along with my endowment until maturity, what tax will i pay on it? cause if i should be paying an annual tax on my earnings (interest gained) on my policy`s at the moment then i`m thinking i may be doing something wrong ( although at this stage of the policy i`m not getting much more added to the value than what i`m actually paying PA ) so not a big concern.

My concern would be that, as far as i see the last year of my schedule shows that my policy value will almost double i.e value on year 24 £27000, Value on year 25 (matured) £52000. Would this effectively give me an earning of £23000 which could end up with a 47% tax deduction if i were to be earning a salary that would put me in that bracket.


I`m trying to figure this out here, please forgive my ignorance for not having a clue as the Missus usually does the wheeling and dealing when it comes to these things and i just enjoy my Bud at convenient times (as we do) Oh! I`m also just a Plasterer

frogboy

We have an endowment (albeit it is only worth about £7000 at this stage) although when it matures in 15 years it will be worth £45,000. Yes I know £45000 may not be worth a lottery win in 15 years time but it may help with a few nice holidays etc. If I leave it in until the end of term then from what everyone is saying I would pay Aus tax on the gain each year (correct me if I am wrong), how would I pay the tax on this in Aus? Would I need to give the ATO a copy of my investment for the year and then they would send me a bill accordingly? I am starting to wonder whether it is worth all the hassle to keep it or just cash it in now and put it towards the 'new' Oz mortgage that we will get when we land.

cheers

Grayling

You do not pay Tax on the annual growth on endowments in the UK.

You would have to pay it if you were in Australia....to the Australian tax office.

G

Sunny_Glesga

How does this look?


If I were to cash in my Endowment policy after running 12 years and having 13 years to run, then invest it in high interest account in Aus it would work out like:

Open account with : (Policy cash in value) £12000 exchanged at todays rate £1= $2.49 = $29,931.60


HSBC offering 5.9% PA

Year 1 end $29,931.60 @ 5.9% total value = $31,697
Year 2 end $31,697 @ 5.9% total value = $33,567
Year 3 end $33,567 @ 5.9% total value = $35,547
Year 4 end $35,547 @ 5.9% total value = $37,644
Year 5 end $37,644 @ 5.9% total value = $39,865
Year 6 end $39,865 @ 5.9% total value = $42,217
Year 7 end $42,217 @ 5.9% total value = $44,707
Year 8 end $44,707 @ 5.9% total value = $47,344
Year 9 end $47,707 @ 5.9% total value = $50,137
Year 10 end $50,137 @ 5.9% total value = $53,095
Year 11 end $53,095 @ 5.9% total value = $56,227
Year 12 end $56,227 @ 5.9% total value = $59,544
Year 13 end $59,544 @ 5.9% total value = $63,057



High interest account with HSBC after 13 yrs it would be worth $63,057

Convert at exchange rate of $2.49 = £1 = £25,324


This would be excluding all payments that would have been made towards the account on monthly basis, if my monthly payment of £104 (original endowment payments) or equal to $259 per month were added to this it would look like this: ( the calculations are only shown on a yearly basis, if they are added on a monthly basis by the bank then this would make a substantial difference)???????



Open account with : (cash in value) £12000 exchanged at todays rate £1= $2.49 = $29,931.60 + $259 pm x 12 = 3107



HSBC offering 5.9% PA

Year 1 end $29,931 + $3107 = $33,038 @ 5.9% total value = $34987
Year 2 end $34,987 + $3107 = $38,094 @ 5.9% total value = $40,341
Year 3 end $40,341 + $3107 = $43,448 @ 5.9% total value = $46,011
Year 4 end $46,011 + $3107 = $49,118 @ 5.9% total value = $52,015
Year 5 end $52,015 + $3107 = $55,132 @ 5.9% total value = $58,375
Year 6 end $58,375 + $3107 = $61,482 @ 5.9% total value = $65,109
Year 7 end $65,109 + $3107 = $68,216 @ 5.9% total value = $72,241
Year 8 end $72,241 + $3107 = $75,348 @ 5.9% total value = $79,794
Year 9 end $79,794 + $3107 = $82,891 @ 5.9% total value = $87,792
Year 10 end $87,792 + $3107 = $90,899 @ 5.9% total value = $96,262
Year 11 end $96,262 + $3107 = $99,369 @ 5.9% total value = $105,232
Year 12 end $105,232 + $3107 = $108,339 @ 5.9% total value = $114,731
Year 13 end $114,731 + $3107 = $117,838 @ 5.9% total value = $124,790


Result: Cash in Endowment Policy, put it into High Interest account and deposit on Monthly basis the amount of payment made each Month if Policy were to run course for another 13yrs

Final value of: $124,790 which is equivalent to £ 50,116



Final value of Policy if it were to run its course and keep in line with forecast = £52,000

This includes Life Insurance!



Final Value if I were to cash in policy, Put into H/Interest account
and make regular monthly payments as would have if I kept the
policy running full term =£50,116

Interest paid on a yearly basis





BIG Question: Can someone advise me on the TAX implications of both routes? Free of charge please


nackered after that!

carolwilk34

Oh My God!!! I'm sorry I started this post cos I'm none the wiser now after this post LOL




Carol

Sunny_Glesga

Well carol, what can i say

lets all just cash them in and get P****d for a few weeks or more

carolwilk34

With wot I'm getting back for mine, I'll be on halfs!!!!!!

Seriously crap !

annqldau

Mine was only ever going to be worth 13,000 quid and even then they expect us to get less than that so i'm already taking a loss and now i'm going to have to pay tax on it it's a farce... . They say save stuff for the future but it's not worth the effort. Aus Gov going to take 50% but then when I retire say Oh no! you can't have this and that off us... .

MartinLuther

If it is only going to be £13k and you don't have any other FIFs (e.g. private pensions, ISAs, etc...) then you will be under the $50k trigger for paying tax on the yearly increase. In this case I've never worked out what happens at the end - i.e. whether you're liable to tax on the final payout or not - you'll have to ask someone else about this.

MartinLuther

With regards to the HSBC account and assuming an average of 35% tax then you would end up with approximately $100k at the end of year 13. With the Aus tax on your UK policy you would end up with approximately $95k (again assuming an average 35% tax rate).

Obviously the highest return comes from staying in the UK and getting the payout tax free. However I would not let that influence my decision.

Some things to note.
The current 5.9% interest rate may not be realistic over 13 years.
The endowment may not perform as expected.
If you sell your policy you may get significantly more than your surrender value - this would boost the HSBC account earnings.
The Aus tax on your UK policy has to be paid out of you Aus wages.