Taxation of Benefit Payments

Taxation of Income Payments

Any income paid from the Care Plan to a Registered Care Provider in respect of care for the annuitant can be made tax-free. To qualify, the care provider must be registered with one of the following:

Where any income is paid directly to the annuitant, a non-registered care provider or a third party, the income will be subject to tax in line with treatment for PLAs. 

In this case, we may be required to deduct an element of tax at source, but the annuitant will be responsible for ensuring that they are ultimately paying the correct amount of tax. 

Under current tax rules, in order to determine the tax to be deducted at source, we will establish the capital / interest content of each income payment. This will be done in line with the underwriting and mortality assessments used at outset. We will then deduct basic rate tax at the Savings rate (currently 20%) from the interest portion of each payment. 

If an annuitant forwards a completed R85 to us, we will be able to make payments gross of tax.

Taxation of Death Benefits 

Under current legislation, any lump-sum death benefit payable from a Care Plan can be paid without the deduction of tax.

However, it may be taken into account for inheritance tax purposes, even where it has been assigned to a trust.