Clause 172 - Gains on policies of life insurance etc: rate of tax
Finance Bill
9:15 am
Mr Howard Flight (Arundel and South Downs, Conservative)
The clause establishes new rules that give policyholders a 20 per cent. credit on their paid-out policies so, self-evidently, higher rate taxpayers will pay a further 20 per cent., the equivalent policyholder rate for life companies having been reduced from 22 to 20 per cent. The effect will be that someone who is paid out a 20-year policy, of which 19 years were under the old regime, will get only a 20 per cent. credit although the tax will have been deducted at 22 per cent. or more for the overwhelmingly majority of the policy's life.
We appreciate that that situation is not different from what happened in the past when the basic rate dropped from 25 to 22 per cent., but this matter has not been given much publicity, so policyholders may not be aware of the change in their liabilities. Our forthcoming amendment to the schedule deals with that.