Corporation Tax: exemption for investment life insurance contract payouts
Published 28 October 2026
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This publication is available at https://www.gov.uk/government/publications/corporation-tax-treatment-of-investment-life-insurance-contract-payouts/corporation-tax-exemption-for-investment-life-insurance-contract-payouts
Who is likely to be affected
Companies holding Investment Life Insurance Contracts (ILICs) that are not life insurance companies. The measure does not affect other holders of life insurance contracts.
General description of the measure
This measure makes explicit that the existing Corporation Tax exemption for companies receiving payouts under ILICs applies only when the contract is held otherwise than for the purposes of a trade the company carries on.
The exemption does not apply where a company holds an ILIC for the purposes of a trade it carries on. In such circumstances a payout under an ILIC should be taxable as part of the profits from the trade. This measure modifies the legislation to make that position explicit.
Policy objective
The measure confirms that the Corporation Tax exemption is available only where an ILIC is held otherwise than for the purposes of a trade the company carries on.
Background to the measure
The measure was announced at Budget 2026.
Detailed proposal
Operative date
The measure will apply to accounting periods beginning on or after 1 January 2027.
Current law
The relevant law is contained in section 562 of the Corporation Tax Act 2009.
Proposed revisions
Section 562 is amended to make explicit that the exemption from Corporation Tax provided by section 562(4) is available only when the ILIC is held otherwise than for the purposes of a trade the company carries on.
The legislation will be introduced in Finance Bill 2026-27.
Summary of impacts
Exchequer impact (£ million)
| 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 | 2031 to 2032 |
|---|---|---|---|---|---|
| negligible | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
Equalities impacts
This measure does not affect individuals, therefore it is not anticipated that there will be disproportionate impacts on any protected groups.
Administrative impact on business including civil society organisations
This measure is expected to have a negligible impact on under 50 businesses that hold ILICs that are not life insurance companies, by making explicit that the Corporation Tax exemption is available only where an ILIC is held otherwise than for the purposes of a trade the company carries on.
One-off costs are expected to include familiarisation with the change. There are not expected to be ongoing costs.
The measure is expected overall to have no impact on businesses’ experience of dealing with HMRC as it doesn’t change any tax administration processes or obligations.
The measure is not expected to impact civil society organisations.
Operational impact (£ million) (HMRC or other)
This measure is expected to have no operational impact on HMRC or other departments.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This is not applicable as none of the evaluation thresholds apply to this measure. We will consider monitoring and evaluation in the future as appropriate.
Further advice
If you have any questions about this change, email the financial services team in HMRC at financialservicesbai@hmrc.gov.uk.