Under UK tax rules for 2026/27, time apportionment relief may reduce the UK income tax charge on a gain from a life insurance policy or capital redemption policy by the share of time you were not UK resident while you held it. Assuming the policy qualifies and you owned it for 10 years, 6 of them as a non-resident, broadly 60% of the gain would be removed from the UK charge. The relief is in section 528 of the Income Tax (Trading and Other Income) Act 2005.

What the relief applies to

The relief applies to "chargeable event gains". These can arise on policies such as investment bonds on a full or partial surrender, on maturity, or on death. A gain on these policies is taxed as income, not as a capital gain, so the relief can be valuable for someone moving back into higher rate tax.

It is not a relief for ordinary funds, shares or bank accounts held directly. Different rules apply to those.

How the calculation works

The legislation reduces the gain by the fraction A divided by B, where:

  • A is the number of "foreign days" in the material interest period
  • B is the total number of days in the material interest period

Foreign days are days in tax years when you were not UK resident, plus days in the overseas part of a split year. The material interest period is broadly the time during which you held the policy.

So the taxable gain becomes the full gain multiplied by (1 minus A/B). The reduced gain may then also qualify for top slicing relief. HMRC's guidance confirms that the number of years used in that calculation is itself reduced by the period of non-residence.

Which policies qualify

HMRC's guidance draws a line at 6 April 2013:

  • Policies issued on or after 6 April 2013: the relief can apply to both UK and offshore policies where the policyholder had periods of non-UK residence.
  • Policies issued before 6 April 2013: the relief applies to offshore policies, but not to UK policies.

Changes to an older policy, such as assignments or variations, can sometimes affect which rules apply, so the policy history should be checked.

Returning within five years

If you left the UK after being resident in at least four of the seven tax years before the year of departure and come back within five years, the temporary non-residence rules can apply. A chargeable event gain arising while you were temporarily non-resident can then be taxed in the tax year you return. HMRC's guidance confirms that the time apportioned reduction for foreign days still applies in that situation, but the remaining portion is taxed on return rather than falling outside UK tax.

Illustrative example only, not a real client. Mark bought an offshore policy for GBP 200,000 when he moved to Dubai. Six years later he returned to the UK and, four years after that, fully surrendered it for GBP 300,000. Assumptions: no withdrawals or earlier chargeable events, whole years used instead of exact day counts, and Mark was non-resident for all of the first six tax years with no split years. The gain is GBP 100,000. Relief removes 6/10, leaving GBP 40,000 potentially taxable as income. For top slicing, the 10-year period is reduced by the 6 years abroad, so 4 years would be used. The final tax depends on his other income in the year of surrender. In practice, exact day counts and residence history would be used.

For more on the tax steps around moving home, see our guide to returning to the UK after living abroad.

Practical points

  • Keep a clear record of your UK residence status for each tax year, including split years, as you will need it to count foreign days.
  • The insurer issues a chargeable event certificate, but it may not reflect your residence history. The relief is claimed through your own tax return.
  • Timing matters. Cashing in while still non-resident, after returning, or partly in each period can give different results depending on your circumstances and the country you live in at the time, which may tax the gain under its own rules.

Common mistakes

  • Assuming a pre-2013 UK policy will get the relief.
  • Forgetting that a return within five years can bring a gain back into UK tax.
  • Relying on the insurer's certificate without adjusting for foreign days.
  • Treating the relief as making the whole gain tax free.

A regulated financial adviser can help. Get in touch for a free introduction.

Sources and further reading

Last reviewed: October 2026. Tax year: 2026/27. Jurisdictions covered: UK. Rates, legislation and guidance change, so recheck before relying on this. Rules can differ between England and Wales, Scotland and Northern Ireland; tax residence is fact-specific; treaty outcomes depend on residence, domicile or nationality provisions; examples are simplified and omit reliefs, costs, exchange rates and anti-avoidance rules. This is general information, not financial, tax or legal advice. Take advice in the relevant country before acting.