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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Exceptions: mortgage protection policies

Insurance policies designed solely to pay off a repayment mortgage in the event of thedeath of an individual borrower are excluded from the chargeable event legislation. Thisis so long as the mortgage is of the individual’s home or of any premises occupied bythe individual for the purposes of his or her own business. These are reducing-termassurance policies where the death benefit reduces in line with the principal of themortgage loan. Such policies have no investment element and should acquire no surrendervalue so are unlikely to give rise to gains anyway.

This exclusion only applies to policies that pay out on one death only. It does not extendto group life mortgage protection policies, which remain within the scope of thechargeable event legislation unless taken out by the exceptions for certain group lifepolicies - see IPTM7025 to IPTM7050.

Further reference and feedback IPTM1013