Traded Endowment Policies are either qualifying or non-qualifying for UK taxation purposes. The majority of TEPs are qualifying.
For UK tax payers these policies are subject to capital gains tax (CGT) on maturity, at a death claim, or if resold. The capital gain is calculated by deducting the purchase price and premiums paid from the proceeds received.
Any capital gain made above the annual CGT allowance (£9,600 for tax year 2008/09) is taxable at a flat rate of 18%. Policies bought in joint names can utilise both CGT allowances, i.e £19,200 in 08/09
On maturity, at a death claim or resale by UK tax payers the gain (chargeable event) arising is potentially subject to income tax but only for higher rate tax payers. This is subject to ‘top slicing' relief if the policy is owned by an individual investor or trustee.