HMRC internal manual

Insurance Policyholder Taxation Manual

IPTM3734 - Gains arising during period of non-UK residence

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When a gain arises from a UK policy and the individual is not resident in the UK, the gain is not subject to tax in the UK. However, this does not apply if the period of non-UK residence is temporary.

Temporary non-UK residence

If the gain arises when a person temporarily lives abroad, the taxable amount is calculated in the same way as if the person had been UK-resident.

An individual is temporarily non-resident if:

  • They have sole UK residence for a residence period and immediately following that period one or more residence periods occur for which they do not have sole UK residence.
  • In 4 or more of the 7 tax years immediately preceding the year of departure the individual had either sole UK residence for the tax year (or the year must have been a split year that included a residence period for which the individual had sole UK residence).
  • The temporary period of non-residence is 5 years or less.

The gain is taxable in the tax year during which the person returns to the UK. A time apportioned reduction for the period of non-UK residence/foreign days is still applicable for this period.


Maureen takes out a life policy on 1 May 2013 from an insurer based in the UK. She moves to Germany to live and work on 6 April 2017. She fully surrenders the policy on 5 April 2018, giving rise to a chargeable event gain of £15,000.

Maureen returns to the UK to live and work on 6 April 2018. Assume she is non-resident under the statutory residence test for 2017-18.

The chargeable event gain has arisen at a time when Maureen is non-UK resident. Maureen was UK resident in the period immediately preceding her move to Germany and was UK resident for 4 or more tax years out of the 7 tax years immediately before the year of her move to Germany. Her period of non-residence was less than five years. She was therefore temporarily non-UK resident and the gain will be chargeable on her return to the UK.

She will need to report the gain on her return to the UK in the tax year 2018-19.

She will however be entitled to relief for her period on non-UK residence.

The policy ran from 1 May 2013 - 5 April 2018 (1,801 days). There were 365 foreign days.

Maureen is due a time apportioned reduction of:

£15,000 x 365/1,801 = £3,040

The chargeable event gain is therefore £15,000 - £3,040 = £11,960. This should be included on her tax return form for the 2018-19 tax year, the year when she returns to the UK.

In calculating the number of days in the material interest period, both the start date and the end date of the policy are included in the calculation. In the above example, this includes 1 May 2013 and 5 April 2018 as whole days. Likewise, 5 April 2017 and 6 April 2018 are included as whole days within the UK resident element of the period, and 6 April 2017 and 5 April 2018 are included as whole days in the calculation of foreign days.