Glossary · UK
What is Qualifying Life Policy?
A life-insurance policy meeting HMRC conditions so that its proceeds are normally free of further income tax in the policyholder's hands.
Full Definition
A qualifying life policy is a life-assurance contract that satisfies a set of HMRC conditions on premium pattern, minimum term and minimum life cover. Broadly, premiums must be reasonably level and payable at least annually for at least ten years (or until earlier death), and the sum assured must meet a minimum relative to the premiums. When these tests are met, the policy gains favourable tax treatment: the proceeds on maturity, death or qualifying surrender are generally not subject to further income tax, because the life office has already been taxed on the underlying fund. Non-qualifying policies, by contrast, can produce a chargeable event gain assessed to income tax. Since 6 April 2013 there has also been an annual premium limit of GBP 3,600 across an individual's qualifying policies; premiums above that cap can lose qualifying status. These rules matter when comparing endowments, whole-of-life and savings-style protection plans, as the wrapper's tax outcome can materially affect net returns.