Investment Bond Top Slicing Relief

krysiatennis

Looking to cash in investment bond held for 20 years
It consists of 20 policies.
I am wondering about tax implications and whether top slicing relief can be applied
Wife and I both in 80s hold the bond in joint names
We are basic rate tax payers. If we cash the bond the
chargeable event gain would be 80K split two ways
this would take us into the higher rate tax. We believe
that top slicing relief may be applied. We have used an online
top slicing calculator and when we input our figures it shows no tax payable. Is it as straightforward as that or are we missing something
Obviously we will see financial advisor but want to do some groundwork first.

HappyHarry

krysiatennis wrote: »

Looking to cash in investment bond held for 20 years
It consists of 20 policies.
I am wondering about tax implications and whether top slicing relief can be applied
Wife and I both in 80s hold the bond in joint names
We are basic rate tax payers. If we cash the bond the
chargeable event gain would be 80K split two ways
this would take us into the higher rate tax. We believe
that top slicing relief may be applied. We have used an online
top slicing calculator and when we input our figures it shows no tax payable. Is it as straightforward as that or are we missing something
Obviously we will see financial advisor but want to do some groundwork first.

Providing it's an onshore bond (most likely, but worth a phone call to check), then your top slicing should work like this:

Total Gain = £80,000
Total complete years held = 20
Total gain per year = £80,000/20 = £4,000
Total gain per year per person = £4,000/2 = £2,000

If you add this £2,000 to your income for this tax year, does it push you into higher rate tax?

If no, then no more tax to pay.

If yes, then you will have to pay some additional income tax.

You will need to carry out the calculation for both you and your wife, as you are taxed separately.

[Deleted User]

HappyHarry wrote: »

If you add this £2,000 to your income for this tax year, does it push you into higher rate tax?

Sorry to jump on this thread - I started a similar thread on top slicing relief a while ago, but no one has responded. My partner has a similar bond and we wanted to understand how TSR works. When you add the average gain to determine if you go into higher rate tax, do you first deduct the personal allowance.

Also, there's another new thread about this type of investment. and DUNSTONH mentioned that it may be more beneficial to surrender a segment policy rather than take 5% of the total amount. My partner's policy is in 20 subpolicies - if he surrenders 1 policy, how would the gain be worked out on that policy