IPTM7215 | Reporting requirements for policy in a valid ISA

Life insurance policies held within valid ISAs

The separate insurance Individual Savings Account (ISA) was abolished on 5 April 2005.

Since 6 April 2005, provided certain conditions are met, life insurance policies can be held within the stocks and shares ISA, or, since 6 April 2017, within the Lifetime ISA. There is detailed information on ISAs in the ‘ISA managers’ guidance’ published on gov.uk. Insurers can find the guidance useful to check if a life insurance policy can be included in an investor’s ISA. The ISA Regulations themselves are contained in SI 1998/1870.

No requirement to report gains on policies held in valid ISAs

Where a policy is held within a valid ISA, chargeable event gains can still arise on, for instance, a surrender of the policy. However, under the ISA Regulations, such gains are exempt from tax.

The ISA Regulations also specifically disapply the requirement for insurers to report chargeable event gains to policyholders and HMRC where the policy is held within a valid ISA and insurers must not issue certificates for gains on a policy in these circumstances.

The exemption from tax on chargeable event gains on policies held in an ISA doesn’t apply to gains on termination events as a consequence of the ISA becoming void – see IPTM7220 – or any excess events which have arisen as a result of part surrenders of the policy before the termination event.