Budget 2011: Life Assurance Premium Relief to be abolished

The government has announced plans to abolish life assurance premium relief (LAPR) in the budget.

It is one of the 43 tax reliefs targeted for removal by Chancellor George Osbourne in a bid to simplify the tax system.

LAPR is an income tax relief allowed to policyholders on premiums in respect of qualifying policies issued before 14 March 1984.

There is no relief on premiums in excess of £1500 or 1/6th of total income whichever is the greater, and eligibility is only for policies providing a capital sum on death.

The relief entitlement is half the basic rate of tax and is granted by permitting the policyholder to deduct the appropriate sum (currently 12.5%) when paying the premium.

Alternatively a policyholder can elect to pay the gross premium and reclaim the tax.

The government said it intended to abolished this after 2012 in future Finance Bills or other legislative vehicles, with a final date set out after consultation.

Relief for life assurance premiums paid by employers under employer-financed retirement benefit schemes is also included in the list.