Guidance

HS321 Gains on foreign life insurance policies (2026)

Updated 6 April 2026

This helpsheet deals with chargeable event gains arising from foreign life insurance policies. It covers the most common circumstances that you’re likely to come across when dealing with the taxation of gains on foreign life insurance policies. These notes are generally applicable to individuals, trustees and personal representatives of a deceased person unless the notes say otherwise.

Chargeable event gains can also arise on purchased life annuities as well as capital redemption policies. If you believe you have one of these two types of policy, or your circumstances are more complex, you can find more detailed guidance in the Insurance Policyholder Taxation Manual (IPTM).

In these notes ‘gains’ are chargeable event gains. Chargeable event gains are taxable as income rather than capital gains, so capital losses and the annual exempt amount cannot be set against them. Normally gains on foreign life insurance policies, unlike gains on UK policies, do not attract a non-repayable basic rate tax credit.

Ask your insurer if you’re in doubt:

• about what sort of policy you have
• whether there has been a chargeable event gain
• whether tax is treated as paid

Part 1 — Chargeable event gains — how they arise 

This part will help you decide if you’ve made a gain because you received a payment or other benefit.

The Trust and Estate Foreign Notes provide similar guidance for trustees and personal representatives. That helpsheet also provides supplementary information for foreign trusts.

1. Types of policy

The type of policy you have and the type and amount of any payment or benefit you received are all things that may affect whether you have to pay any Income Tax.

A foreign policy is usually one issued by an insurer from outside the UK. If you’re in any doubt as to whether your policy is of this type ask your insurer.

1.1 Qualifying and non-qualifying policies

For tax purposes, the most important distinction is between ‘non-qualifying’ and ‘qualifying’ policies. Most foreign policies are non-qualifying policies. As such, this helpsheet focuses on non-qualifying policies. Non-qualifying policies will normally give rise to a gain, but a number of factors can affect whether you have to pay any tax or not.

A single premium life insurance policy is one where you pay an amount to the insurer (a premium) at the beginning of the policy. You may also be able to pay additional premiums. This type of policy can never be a qualifying policy and is most likely to give rise to a taxable gain.

1.2 Personal Portfolio Bonds (PPBs)

PPBs give rise to an annual charge. They are broadly policies that allow the policyholder, or someone connected with them or acting on their behalf, selection of the property by which the policy is valued unless the only property that can be selected is:

• property appropriated by the insurer to an internal linked fund
• units in an authorised unit trust
• shares in an approved investment trust, or an overseas equivalent
• shares in an open-ended investment company
• certain cash deposits
• certain life policies
• interests in certain collective investment schemes
• shares in a UK Real Estate Investment Trust (REIT) or an overseas equivalent
• an interest in an authorised contractual scheme

Most policies will not be PPBs. Your insurer will be able to tell you if your policy is a PPB or not.

2. What gives rise to a gain

The most common occasions on which a gain arises are if during the year:

• cash or other benefits were received on a full or part surrender of a policy
• a policy matured or was brought to an end by the death of the life insured
• there was a sale or assignment of a policy, or part of a policy, for value
• the policy was a PPB, even if the insurer had not paid cash or other benefits during the year

If the calculations which are required following these events show that a gain has arisen, your insurer should send you a chargeable event certificate showing the gain. Part 5 of this helpsheet includes some examples which show how gains are calculated on each of the above occasions.

You’ve probably made a gain if you’ve received a benefit or one of the circumstances in this section has occurred and none of the below bullet points apply.

You will not have made a gain if the:

• calculations show that there’s no gain
• event is the transfer of beneficial ownership of the whole or part of a policy to a spouse or civil partner who you are not separated from
• beneficial ownership was transferred as security for a debt
• beneficial ownership was transferred for no money or money’s worth (this includes gift assignments)
• policy was made before 20 March 1968 and not changed after. If your policy was made before that date but was changed after it, the policy may be treated as made after that date

For other circumstances where a gain may not arise see IPTM3410 to IPTM3430.

3. Chargeable event gain certificates

Insurers are required by law to issue a certificate if they know that a gain has been made on a life insurance policy. In most cases, therefore, if you’ve made a gain you will have received a certificate reporting the gain, either directly from the insurer or indirectly via trustees or a lender.

If your policy was taken out before 6 April 2000, then the insurer may not have an obligation to issue a chargeable event certificate even if a gain has been made. In such a case, you will need to calculate the gain. Details about how to do this can be found in Part 4 below, and Part 5 contains some examples.

4. No chargeable event gain certificate received — but a gain has been made

If you have not received a certificate, in most cases this will be because you did not make a gain. This could be because of your type of policy, for example, it is a qualifying policy, or what you did, for example, you assigned your policy as a gift. Alternatively, the amount of benefit received did not give rise to a gain.

However, if any of the following circumstances apply, a gain may have arisen and should be reported even though the person chargeable may not have themselves received a certificate from their insurer.

The insurer may have sent the certificate to someone who is not liable for any tax due, for example, where the policy is held by:

• the trustees of a:
  • trust you set up or contributed property
  • bare trust of which you are a beneficiary
• anybody holding a policy in their own name as your nominee
• a lender to whom your policy was previously assigned as security for a debt of yours

If you believe this may have happened, you should ask the trustees, nominee or lender whether the insurer has sent them a certificate and if so, ask them for a copy.

The insurer has sent the certificate to the wrong address because, for example, the policyholder has changed address without telling their insurer. If this may have happened, you should contact the insurer to ask whether they issued a certificate to your old address and, if so, to request a copy.

The insurer may not know about the event giving rise to the gain. For example, a policy may be sold but neither buyer nor seller have advised the insurer that the life insured under the policy has died. If this has happened, you should contact the insurer to inform them of the event that has happened and you should also ask them for a chargeable event certificate.

Part 2 — When you should report a chargeable event gain

5. Person liable to tax

5.1 Individuals

A gain will be treated as part of your income if you’re one of the following:

• ‘beneficial’ owner of the rights under the policy — you’re likely to be the beneficial owner if you paid the premiums and you, or your estate after your death, are entitled to any benefits under the policy — you may be regarded as the beneficial owner in other circumstances, usually because you’re absolutely entitled to benefit from a policy — for example, you may be the beneficiary of a bare trust
• owner of rights under a policy which is held as security for a debt of yours, such as a mortgage
• person who either created or added property to a trust that holds the policy (the settlor). The gain is treated as your income whether or not you are entitled to benefit under the terms of the trust (unless the trust is a bare trust or a resulting trust — see above). If you are liable, you’re entitled to recover from the trustees any tax that you pay on the gain
• UK beneficiary of an overseas trust or entity — see Helpsheet 262 Income and benefits from transfers of assets abroad and income from non-resident trusts which explains more about such gains

5.2 UK resident trustees

A gain will be treated as income of trustees of a trust if the rights under the policy:

• are held on charitable trust
• are held on non-charitable trust and the person who created the trust is non-UK resident or is a company or foreign institution that has been dissolved or wound up
• are held on non-charitable trust and the person who created the trust has died (unless the gain arises in the same tax year in which the individual died, in which case the gain is treated as the individual’s income)
• are held on non-charitable trust and no individual or personal representatives are otherwise chargeable, or
• are held as security for a debt owed by the trustees

5.3 Personal representatives

A gain may be treated as income of personal representatives where it arises on a policy and it is not treated as:

• income of a deceased individual
• having been taxed at the basic rate

This may be the case for example, where a policy of life insurance owned by the deceased but taken out on the life of somebody else is surrendered by the personal representatives, or matures while it is still an asset of the estate.

5.4 Benefits from overseas trusts and entities

A chargeable event gain on a foreign life insurance policy is also treated as income for this purpose if the rights under the policy or life annuity are held:

• by a non-resident trust and the person who created the trust is not charged UK tax on the gain
• as security for a debt owed by a non-resident trust
• by an overseas entity
• as security for a debt owed by an overseas entity

For more information see the notes about helping you fill in the foreign pages of your tax return and Helpsheet 262 — Income and benefits from transfers of assets abroad and income from non-resident trusts. You can also find more information in the Insurance Policyholder Taxation Manual.

6. How to report a gain

The gain should be reported. How to do this depends on your circumstances.

6.1. If an individual is liable to tax

If you are already within Self Assessment you should report the gain in your Self Assessment return. If you are not within Self Assessment but the gain (together with your other savings and investment income) exceeds £10,000, you will need to register for Self Assessment and report the gain in your Self Assessment return. See the following guidance on how to register.

The gain should be reported in the ‘Other UK income’ section of the tax return, under ‘Gains from life insurance policies, capital redemption policies and life annuity contracts’ . If you complete a paper tax return, use supplementary pages SA101.

If you are not within Self Assessment and the gain (together with your other savings and investment income) does not exceed £10,000, you should report it by either:

• contacting Self Assessment: general enquiries
• sending a copy of the chargeable event certificate to Self Assessment, HM Revenue and Customs, BX9 1AS. Make sure you include your National Insurance number

6.2. If UK resident trustees are liable to tax

The gain should be reported in the Trust and Estate Foreign Tax Return (SA904), under ‘Gains on foreign life insurance policies, life annuities and capital redemption policies’ .

6.3. If personal representatives realised the gains

How the gain should be reported depends on whether tax at basic rate is treated as paid on the gain. Refer to the guidance in section IPTM3240 of the Insurance Policyholder Taxation Manual.

7. Which year is a gain taxable

If the date of the event falls in the period 6 April 2025 to 5 April 2026, then it’s in the tax year ended 5 April 2026 and the gain forms part of your income for this tax year.

All part surrenders in the same insurance year are treated as arising at the end of that insurance year. An insurance year (which may also be referred to as a ‘policy year’) is normally the 12-month period beginning on the anniversary of the date on which you took out the policy.

If an event brings a policy or contract to an end – full surrender of rights, death, maturity or taking a capital sum as a complete alternative to annuity payments – the insurance year is treated as ended on that date. It is then referred to as the ‘final insurance year’. If that rule would result in an insurance year beginning and ending within the same tax year, then the final insurance year is extended to include the previous insurance year.

If there are both part surrenders and a full surrender in the same insurance year, then any gains arising on the part surrenders will be swept up in the final gain calculation. In such a case, only the gain on the full surrender should be reported.

7.1 Example — part surrender

A policy was taken out on 1 July 1997. The insurance year would therefore end on each subsequent 30 June until the policy ceases. If a part surrender took place on 31 January 2025, a subsequent gain would arise at the end of the insurance year in which the part surrender took place. In this example, the gain would arise on 30 June 2025.

30 June 2025 falls into the 2025 to 2026 tax year so the gain should be returned for that year despite the part surrender having taken place in a different tax year.

7.2  Example – part surrender followed by a full surrender in the final insurance year

There is an insurance year running from 1 June 2024 to 31 May 2025. A part surrender takes place on 1 May 2025, giving rise to a gain at the end of the insurance year on 31 May 2025.

The policy is fully surrendered on 30 October 2025. Because this would result in the final insurance year running from 1 June 2025 to 30 October 2025, and thus beginning and ending in the same tax year, the final insurance year is extended and runs from 1 June 2024 to 30 October 2025.

The insurer will calculate the gain arising on the full surrender, taking into account the previous part surrender which occurred on 1 May 2025. In this scenario the only gain that should be reported is the gain arising on the full surrender on 30 October 2025.

7.3 More than one certificate received

In some cases the insurer may have sent you more than one certificate relating to a particular gain, with the later certificate showing a revised figure of benefits paid or amount of chargeable gain. This could happen, for example, if there are part surrenders in the final insurance year. In this case, you should enter the details shown on that later certificate.

Part 3 — Amount of the gain

8. Determining the amount of the gain

In most cases, the gain that has arisen will be shown on a certificate which the insurer will send to the policyholder. The certificate should also show whether tax is to be treated as paid on the gain and the number of complete policy years that the policy has run from commencement or from the previous gain. If the policy has been sold or the policyholder believes that a gain has arisen, but no certificate has been received, then Part 5 below explains how to calculate the chargeable event gains that can arise. If the result given by the calculation is zero or a negative amount, refer to the Section ‘Loss, or no gain, on the policy’ below.

9. When to reduce the gain advised by your insurer

9.1 Dividing gains — joint owners

A policy is treated as if it’s in co-ownership if:

• more than one individual is beneficially entitled to the benefits payable under the policy
• the rights under the policy are held on trusts created by more than one person (including where property was added to an existing trust)
• the rights under the policy are held as security for a debt owed by more than one person
• the rights under the policy are held in more than one capacity (for example, part of the rights are held as beneficial owner and part as trustee)

If you have a share in the rights under a policy, your share of any gain that arises is the same as your share of the rights. Joint owners are treated as having equal shares. If you own the policy jointly with your spouse or civil partner, you should each enter on your own tax return half the amount of the gain you’ve calculated or that is reported on any certificate showing a gain that you receive. 

9.2 Time apportioned reductions

You should ignore this section if you’re a trustee or a personal representative of a deceased person who is taxable on a gain. This is because in these circumstances, you are not entitled to a time apportioned reduction.

A time apportioned reduction will be available if you are liable to tax on the gain and you were non-UK resident at some point during the ‘material interest period’. The reduction will not be shown on your certificate. You will need to calculate the reduction yourself and deduct it from the gain shown on your certificate.

The time apportioned reduction is calculated using the formula A / B.

A is the number of days that are foreign days in the material interest period. The material interest period is the part of the policy period during which you meet one of the following conditions:

• you beneficially own the rights under the policy or contract
• the rights are held
  • on non-charitable trusts which you created
  • as security for your debt

Foreign days are all the days in a tax year for which you are not UK resident and any days in a split year in which you are taxed as if not UK resident (the overseas part).

B is the number of days in the material interest period.

If you claim a time apportioned reduction, then you also need to subtract the whole number of years you were non-UK resident in the material interest period from the ‘number of years’ shown on your chargeable event certificate.

If your policy was issued before 6 April 2013 and it has not been varied or assigned since, then the rules concerning the time apportioned reduction may be different to those set out above. If this is the case, or if you wish to find out more about time apportioned reductions, read sections IPTM3730 to IPTM3734 of the Insurance Policyholder Taxation Manual.

10. Tax reliefs

10.1 Top slicing relief (TSR)

You should ignore this section if you’re a trustee or a personal representative of a deceased person who is taxable on a gain. This is because in these circumstances, you are not entitled to TSR.

TSR is generally available when you pay:

• basic rate tax on your other income, excluding the gain, but when the gain is added to your other income, you have to pay higher or additional rate tax
• higher rate tax on your other income, excluding the gain, but when the gain is added to your other income, you have to pay additional rate tax

In order to calculate the amount of the relief you will need to know the number of complete years. This should be clearly stated on the chargeable event certificate that your insurer must send you. If you claim time-apportioned reduction, you need to reduce the number of years shown on the chargeable event certificate by the number of whole years you were non-UK resident in the material interest period (see section 9.2 above).

TSR is given in terms of tax rather than as a reduction to a chargeable event gain. Full amount of the gain should be entered on the tax return.

The calculation of TSR can be complicated and it is not possible to give full details in this helpsheet. Read section IPTM3820 of the Insurance Policyholder Taxation Manual for detailed information about the calculation of TSR.

If a gain is reported in a Self Assessment tax return, HMRC will calculate the amount of TSR due.

Where you can claim TSR and you can claim a time apportioned reduction then the calculation is done in the following order:

1. Time apportioned reduction.
2. TSR.

10.2 Loss, or no gain, on the policy

The result of the calculation when a chargeable event arises on a policy coming to an end may not be a positive amount.

If the result is negative and you made no gains on the policy in earlier years, you have made a loss on the policy. A loss on a life insurance policy cannot be set against a gain on another policy, or against your other income. There is no relief for that loss and you should not make any entries on your tax return.

If the result of a full surrender, death or maturity calculation is negative but you made gains on the policy in earlier years, then you may be able to claim deficiency relief.

10.3 Deficiency relief

The relief is only available to individuals. Trustees or personal representatives are not able to claim. Deficiency relief can be claimed if the:

• chargeable event is one that brings the policy to an end through the surrender of all rights, a final participation in profits, death, maturity, or the taking of a capital sum as a complete alternative to annuity payments
• calculation of the gain on the final chargeable event gives a negative result
• calculation of the gain on the final chargeable event includes a deduction for earlier gains, other than PPB gains, which formed part of the individual’s income
• for the tax year in which the deficiency arises, the individual has income chargeable at least at one of the following ‘relevant rates’: higher, default higher, savings higher, dividend upper, Scottish higher, Scottish advanced, Welsh higher.

Deficiency relief reduces the amount of tax due on other income in the tax year of the deficiency that’s liable to tax at a relevant rate. It does not reduce the amount of tax due at the additional rate.

If you’re entitled to deficiency relief, the deficiency (which is taken into account when calculating deficiency relief) is the lower of the previous gains and the negative amount given by the calculation. Earlier gains typically arise from part surrenders or part assignments. Read section IPTM3860 of the Insurance Policyholder Taxation Manual onwards for details about how to calculate the relief.

11. Wholly disproportionate gains

The method for the calculation of gains arising on part surrenders and part assignments (see section 13 below) may mean that the gain will be ‘wholly disproportionate’ to the underlying economic gain.

If, following a part surrender or part assignment of a policy, the person liable to tax on the gain considers that the gain arising is wholly disproportionate they can apply to HMRC to have the gain recalculated on a just and reasonable basis.

Wholly disproportionate gains tend to arise early in the life of a policy often because policyholders have taken cash from their policy that is far in excess of their 5% tax deferred allowance.

You can find more information on who can apply and the application process in section IPTM3596 of the Insurance Policyholder Taxation Manual.

Part 4 — How to calculate a gain

There are different rules for calculating a gain on a:

• maturity or full surrender
• death
• sale or assignment
• part surrender giving rise to either:
  • a partial withdrawal of benefits
  • a payment of a cash bonus
  • an insurer making a loan
  • sale of part of a policy
• part assignment other than by way of a gift

Your copy of the chargeable event certificate should tell you the gain or contain all the information, possibly apart from the sale price, that you need in order to calculate the gain.

12. Calculation of the gain on maturity, full surrender, death, sale or assignment

12.1 On maturity or full surrender

A gain on maturity or full surrender should be shown on the certificate provided by your insurer, together with the amount of Income Tax treated as paid. If not, it’s calculated as Total Benefits (TB) minus (Total Deductions (TD) plus Previous Gains (PG)).

TB is generally the value of what you receive on maturity or full surrender plus the value of what has been received at any time previously under the policy with the exception of earlier critical illness of disability benefits.

TD is generally all amounts paid as premiums under the policy.

PG is all gains that were someone’s income for tax purposes, in a tax year before that in which your policy matured or was fully surrendered.

All of the amounts above should be available from your insurer if you want to check the calculation. If you’re unable to work out the amounts of previous gains your insurer again may be able to help you.

The calculation can be more complex if you have a related policy. Related policies are typically derived from a maturity option where one policy matures and the proceeds are applied as premium for a new policy. Your insurer should be able to tell you if there were any policies ‘related’ to the policy giving rise to the gain. Read section IPTM7535 of the Insurance Policyholder Taxation Manual for more information.

If you paid more than £100,000 a year into the policy or policies and you received a rebate of commission or you reinvested commission in the policy as additional premium, see guidance at IPTM3527 and IPTM3528 on how to calculate a gain.

12.2 On death

Calculate the gain on death using the same TB minus (TD plus PG) formula, but in this case TB is the surrender value of the policy immediately before death, rather than the amount receivable as a result of death. Ask your insurer to tell you the value if they have not already done so.

12.3 On sale

You also calculate a gain on the sale of all of a policy using the same formula as for maturity or full surrender, except that in this case TB is normally the sale price of the policy, or the value of any other consideration if the policy is not transferred for cash. If the sale is between connected persons, for example, a brother and sister, TB is the market value of the policy. But the transfer of ownership of a policy between spouses or civil partners who are living together does not give rise to a gain.

13. Calculation of the gain on part surrender or part assignment

Gains from part surrenders and part assignments of life insurance policies are calculated annually and arise at the end of each insurance year. The gain for an insurance year when there’s been one or more part surrenders is calculated as follows.

The value of all parts surrendered (TB) less unused one twentieth of the premiums paid in the year and each previous year.

This is subject to a maximum of 100% of the premiums paid (which will be reached if 5% of the premiums are taken for 20 consecutive years).

For part assignments the calculation is the same apart from the value used for TB which is the value of the part sold rather than the part surrendered.

14. Calculation of a PPB gain

Where a policy is a PPB at the end of the insurance year, a PPB gain will be calculated as 15% of (A + B – C).

A is premiums paid from when the policy was taken out until the date of the PPB gain.

B is cumulative amount of PPB gains arising in previous insurance years.

C is cumulative part surrender gains arising in previous insurance years.

No PPB gain will arise in the final insurance year.

Part 5 — Examples of calculations

15. Examples of the calculation of the gain on maturity, full surrender, death or sale using the formula TB minus (TD plus PG).

15.1 Example 1 – on maturity or full surrender

On maturity a policy pays £10,000 (TB).
The premiums paid total £4,000 (TD).
In this example there are no earlier gains.
The gain is £10,000 (TB) − £4,000 (TD) = £6,000.

15.2 Example 2 – on death

As a result of the death of the life assured a payment of £10,000 arises.
The surrender value immediately before death is £8,000 (TB). The premiums paid total £4,000 (TD).
In this example there are no earlier gains.
The gain is £8,000 (TB) − £4,000 (TD) = £4,000, and the gain is treated as income of the deceased for the year of death.

15.3 Example 3 – on sale

Policy is sold for £10,000 (TB).
The premiums paid total £5,000 (TD).
The gain is £10,000 (TB) − £5,000 (TD) = £5,000.

16. Examples of the calculation of a gain on part surrender

16.1 Example 4

Part surrenders are made in the year to 24 May 2025 of £250 and £3,450.
The life insurance policy was made on 25 May 2019 and the initial and only premium was £10,000.
For the year to 24 May 2025 the value of the parts surrendered was £3,700.
One twentieth of the premiums for the year to 24 May 2025 is £500. One twentieth of the premiums for each previously completed year is £500 × 5. Total allowable payment is therefore £3,000.
The calculation is £3,700 − £3,000 = £700.
A gain of £700 arises on 24 May 2025 (assessable in 2025 to 2026).

16.2 Example 5

Part surrenders are made in the year to 31 October 2025 of £1,500.
In each previous year part surrenders of £400 were taken each year.
The life insurance policy was taken out on 1 November 2020 with a single premium of £10,000.
For the year to 31 October 2025 the value of the parts surrendered was £1,500. In the 4 earlier years, £1,600 had been taken from the policy. Total value of parts surrendered are therefore £3,100.
One twentieth of the premiums for the year to 31 October 2024 is £500. The allowable elements for the 4 earlier years total (4 × £500) = £2,000. Total allowable payments are £2,500.
The calculation is the value of rights surrendered £3,100 less allowable payments £2,500 which gives rise to a gain of £600.
The £600 gain arises on 31 October 2025 and is chargeable to Income Tax in 2025 to 2026.

17. Example of the calculation of a PPB gain

A PPB is taken out on 3 June 2022 with a premium of £100,000.

In the insurance year to 2 June 2023, there are no part surrenders. A PPB gain arises on 2 June 2023. This is calculated as 15% x £100,000 = £15,000. £15,000 is chargeable to Income Tax in the tax year 2023 to 2024.

In the insurance year to 2 June 2024, there is a part surrender giving rise to a gain of £30,000. A PPB gain arises on 2 June 2024. This is calculated as 15% x (£100,000 + 15,000 - £0) = £17,250. The gain of £30,000 arising on the part surrender and the PPB gain of £17,250 are both chargeable to Income Tax in the tax year 2024 to 2025.

In the insurance year to 2 June 2025, there are no part surrenders. A PPB gain arises on 2 June 2025. This is calculated as 15% x (£100,000 + £15,000 + £17,250 - £30,000) = £15,337.50. £15,377.50 is chargeable to Income Tax in the tax year 2025 to 2026.

Get more information

For more information about the taxation of chargeable event gains, see the Insurance Policyholder Taxation Manual.

Contact HMRC for advice on Self Assessment and to change your personal details.