Month: May 2026

Life insurance policy on death

This article covers proceeds from non-qualifying policies received upon the insured’s death.

All gains are chargeable unless they are qualifying policies.43.6
Foreign i.e. policies issued by an non-EU insurer say from India will be a non-qualifying policy. 43.21
Death is a chargeable event. 43.6

Gain is reported in deceased’s tax return. IHTM28160

Computation of gain43.7

Gain = TB – (TD+PG)

TB is total benefit; For a life insurance policy, where the chargeable event is the death of an individual covered under the policy, the value of the policy must be taken to be the surrender value of the policy immediately before the death and not the amount of the proceeds. This is the amount of surrender proceeds that the insurer would, as a matter of fact, have been prepared to pay to the policyholder if the policy had been surrendered immediately before the death. IPTM7520 i.e. death benefit is not taxable.

TD premiums paid

PG previous gains; previous gains charged on partial payouts.

See also Friends Provident International note example – death on Page 3.

Charge to Tax43.8

Gain is treated as savings income.

Summary of Basic rate tax credit: RA Blog

Policy TypeBasic rate creditTop slicing relief calculation
UK policyYesYes
Foreign policyNoYes


For calculation of Top slicing relief see Tolley Exam training guide.

Reduction for periods of non-UK residence 43.11

Apply if appropriate.



Sources:

  1. Book – Tolley Annual Income Tax
  2. HS321 Gains on foreign life insurance policies (2025) – GOV.UK
  3. Taxation of Indian Life Insurance policy in UK – Roy Accountants