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Abolition of life assurance premium tax relief will lead to confusion ABI

The Association of British Insurers strongly supports the Government's efforts to simplify the tax system but believes they have got it wrong on Life Assurance Premium tax relief.  

Mark Edwards, Head of Taxation at the ABI said:  

"Whilst we strongly support the Government's efforts to simplify the tax system, we are disappointed that they have chosen to end life assurance premium tax relief. The relief is not obsolete. It still benefits hundreds of thousands of people, many of whom are retired and on low incomes. This move will lead to confusion not simplification. People with affected policies will now have to get to grips with what this change means for them and get financial advice to understand the impact it could have on their policies and benefits."   

Life Assurance Premium tax relief was introduced to incentivise long term regular savings and to encourage people to provide financial protection for their families.   

People paying into qualifying life insurance policies taken out before 1984 currently get 12.5% tax relief on their income tax.  

In 1984 this was abolished for new customers, but the decision was taken to keep it for current customers as it would naturally end on the death of individual policyholders.  

It is estimated that there are still approximately 1.5 million policies in existence, all of which will be affected by the Government's decision to end the tax relief.

Last updated 01/07/2016