Insurers welcome tax rule change

Surplus funds are held to meet funding rules

The insurance industry is breathing a sigh of relief after the government revised plans to tax surplus funds held by insurers.

Insurance companies hold surplus funds in their with-profit funds to meet funding rules and to protect themselves against financial risks.

The tax plan could have cost the industry tens of millions of pounds.

However, the Association of British Insurers (ABI) said the tax plans had now been "significantly revised."

Under the revised plans the tax charge will not apply to surplus funds held in insurers with-profit funds.