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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Immediate Needs Annuities: introduction

Immediate Needs Annuities are usually bought by a lump sum premium when a person fallsill and is in need of long-term care.

Immediate Needs Annuities cannot qualify for the exemption at ITTOIA05/S735 becausethat exemption can only apply for insurance against a future risk ofsickness, disability or unemployment, see IPTM6100 onwards forfurther details.

As discussed at IPTM6010, payments received from ImmediateNeeds Annuity policies will usually be part of the recipient’s taxable income, unlessspecific provisions exempt them from tax.

If certain conditions are met ITTOIA05/S725 exempts Immediate NeedsAnnuities that would otherwise be taxable. The following paragraphs detail the backgroundto the exemption and the conditions that must be met for the exemption to apply.

Further reference and feedback IPTM1013