Switching funds, managers or insurer inside a UK-taxed policy

Why a fund switch is not taxed

A unit-linked policy is a contract with the insurer. Its benefits are measured by the value of the funds or other property it is linked to, but the investments belong to the insurer, which holds them to back its liability to you. In HMRC's words, the insurer “takes the premiums and invests them for income and/or capital gains that accrue until sums are withdrawn from the policy” (IPTM1500). You are taxed only when a chargeable event happens.

The events are listed in s.484: surrender of all rights, assignment of all rights for money or money's worth, maturity, a death that gives rise to benefits, part surrenders or part assignments above the cumulative 5% allowance, and personal portfolio bond deemed gains. A switch from one fund to another inside the same policy is none of these. Nothing is paid to you and nothing is assigned. So there is no gain to calculate, no chargeable event certificate and no entry on your return.

Held directly, the same rebalancing is a disposal. Take a portfolio worth £3,000,000 with £600,000 of unrealised gains that you want to move from equities to bonds. Sold and reinvested outside a policy, the gain above the £3,000 annual exempt amount is taxed at 24%: £143,280, paid that year (gov.uk CGT rates). Inside the policy the same switch costs no tax at the time. The growth is taxed later, as income, when the policy pays out; that trade-off is set out on the page on tax efficiency.

Change by change: what triggers tax

Changing the manager

HMRC's guidance recognises two ways a professional manager can run the money inside a policy without the policy becoming a personal portfolio bond (IPTM7725).

• An adviser appointed by the insurer. The policy does not let you select assets, but it can let you require the insurer to appoint an investment adviser, and the insurer may offer a list of advisers it will appoint. The adviser works under a separate agreement with the insurer and acts as the insurer's agent, not yours.
• A broker-managed fund. “Many companies offer policyholders the opportunity to invest in broker-managed funds.” The adviser may be one you chose. When advising you on the purchase the broker acts for you; afterwards the broker “manages the fund as an agent for the insurer and is remunerated by the insurer”. The fund is one of the insurer's internal funds and is open to any client of that broker.

Of both, HMRC says: “A policy written in these terms would not in general be a PPB.” Replacing one insurer-appointed adviser with another from the insurer's list, or moving from one broker-managed fund to another on the platform, is a switch inside the policy. It is not in s.484 and does not create a gain.

The adviser's name matters less than what happens after the change. HMRC's exception applies where your objectives are so narrow that it is “effectively the policyholder that is selecting the property”, and HMRC applies it to replacement investments in a continuing policy as well as to the first choices (IPTM7730). A new manager who is told which shares to buy is a conduit, and “The terms of the legislation cannot be avoided simply by interposing an investment adviser or broker between the policyholder and the insurer.”

Moving to a different insurer

A policy is a contract with one insurer. Changing insurer means ending that contract and starting another. The old policy has to be surrendered, and surrender of all rights is a chargeable event under s.484; the proceeds are then paid as a premium to the new insurer. We have looked for a provision in ITTOIA 2005 Part 4 Chapter 9, or in HMRC's guidance, that lets a UK resident exchange a policy for one issued by another insurer without a chargeable event, of the kind that exists in some other countries, and have found none. Unless your adviser can point to one in writing, plan on the basis that a move is a surrender.

Hypothetical. A UK resident paid £2,000,000 into an offshore bond nine years and three months ago. It is now worth £3,000,000. She wants to move to another insurer with lower charges. She has taken no withdrawals.

The gain would be taxed one day anyway, so the £450,000 is mostly a cost of timing: tax paid now, at the holder's current rate, instead of later, at a rate that might be lower, in a country that might not tax it, or by family members who might pay less. It also ends the deferral on £1,000,000 of growth. A lower annual charge at the new insurer has to recover that before the move pays for itself.

Alternatives to a full move

• Change what you can inside the existing policy. If the reason is investment choice, switching funds or advisers on the existing platform costs nothing.
• Keep the old policy and send new money to the new insurer. Two policies can run side by side.
• Use the 5% allowance. Withdrawals within the cumulative allowance are not events. They can be paid as premiums into a new policy, moving money across gradually. Each withdrawal counts in the old policy's final gain later; see the 5% withdrawal allowance.
• Move in stages. Surrender whole segments over several tax years, or in a year when your other income is low, to use lower bands and top-slicing relief; see chargeable event gains and top-slicing relief.
• Move when non-resident. A surrender while you are not UK resident is outside UK income tax, unless the temporary non-residence rules bring it back; see moving to, returning to or leaving the UK.

A different situation arises if the insurer itself transfers its business to another insurer under a court-approved or regulator-approved scheme. You are not surrendering anything, and the policy normally continues on its terms with the new insurer. We have not found HMRC guidance on how such a transfer is treated for a UK-resident holder of a foreign policy; ask the insurer for its written statement of the UK tax position before relying on continuity.

Assignments: gift or sale

An assignment of all the rights “for money or money's worth” is a chargeable event (s.484). The value used is the consideration, except between connected persons, where HMRC substitutes market value, “unless there was no consideration so the assignment was not a chargeable event” (IPTM3515). A gift therefore creates no gain for the giver. The person who receives the policy or segments is then taxed on the whole gain when they surrender, calculated on the policy's full history.

Some assignments are disregarded altogether: between spouses or civil partners living together, by way of security for a debt, and on the discharge of a secured debt (IPTM3430). An assignment made under a court order in divorce proceedings is not a chargeable event either, because it results from the court's own jurisdiction, not an agreement for consideration (IPTM3420).

The years for top-slicing run from the commencement of the policy, not from the date of the gift (IPTM3830). The gift is a transfer of value for inheritance tax, normally a potentially exempt transfer that falls out of the estate after seven years; see inheritance tax and succession. It must be a real gift: if the money comes back to the parent, the income tax and inheritance tax analysis changes.

Adding premiums

Paying a further premium into an existing policy is not a chargeable event. Each premium gets its own 5% allowance, starting in the insurance year it is paid and running for 20 insurance years. HMRC's worked example in IPTM7620 shows a £10,000 policy topped up with £5,000 in its third year: by the end of year 5 the allowance is (5 × 5% × £10,000) + (3 × 5% × £5,000) = £3,250.

Two cautions. A top-up is added to the premiums deducted in the final gain calculation, so only the growth on it is taxed, like the rest of the policy. And if the policy is a personal portfolio bond, the deemed gain is 15% of total premiums plus earlier deemed gains, so every top-up increases the annual charge (IPTM3650).

Where switching becomes selection

The freedom to switch covers the permitted investments the insurer offers, and nothing beyond them. The line is the personal portfolio bond test: a policy whose terms let you, a connected person or someone acting for either of you select property outside the permitted categories is taxed on a deemed gain of 15% a year (s.516). Four practical signs that a switching instruction has crossed it:

1. The fund was added for you. A fund made available at your request, or with limits you helped set, fails HMRC's availability test: “If a policyholder had any say in the limiting conditions, set either by the manager of the investment or the insurer, that would make the policy a PPB” (IPTM7780).
2. The instruction names assets. Telling an adviser to buy particular shares, or giving objectives so narrow they leave no choice, makes you the selector (IPTM7730).
3. The asset is not permitted property. Switching into a single listed share, unquoted shares, a property or a private fund that is not a collective investment scheme is selection outside s.520.
4. The policy terms allow it. An option to select non-permitted property counts even if you never use it, and using a power the terms did not give is treated as a variation of the terms (IPTM7715).

The full rules and a year-by-year cost of the 15% charge are in the personal portfolio bond rules. What the policy can hold, with a check of common situations, is on the page on investment flexibility.

Questions about switching and moving

Sources and authorities

Read as at 23 September 2026 for the tax year 2026/27. The worked examples are hypothetical and were checked by script. Where we say we have found no provision, that is a statement about our research, not a ruling.

• ITTOIA 2005: s.484 (chargeable events), s.507 (5% allowance), s.516 and s.520 (personal portfolio bonds and permitted property).
• HMRC Insurance Policyholder Taxation Manual: IPTM1500 (the regime), IPTM3420 and IPTM3430 (assignments), IPTM3505 (insurance year), IPTM3515 (values on surrender and assignment), IPTM3650 (deemed gain), IPTM3830 (years for top-slicing), IPTM7620 (top-up example), IPTM7715, IPTM7720, IPTM7725, IPTM7730 and IPTM7780 (who is selecting).
• gov.uk: income tax rates; Capital Gains Tax rates and allowance; inheritance tax on gifts.

Last updated: 23 September 2026. Research and corrections follow our editorial standards.