investment bond - top slicing - tax due

JeffMason

Hi All,

I'm completing my tax return online and have added the gain from my cashed in onshore investment bond (used to help buy a house) and am getting an amount of tax in the calculation. Which is confusing, as I was told I wouldn't need to pay any tax on it after taking into account my low income and the top slicing relief based upon how many years it's existed.

Can anyone advise on this? maybe I've added something incorrectly? Or got bad advice? Or the calculation is wrong?

I'm not sure if am allowed to add details here / or what I should add though...

Thanks all!

UPDATE: See last post for latest and recap of issue.

[Deleted User]

Would the gain take you into higher rate tax if top slicing relief not claimed?

JeffMason

[Deleted User] said:

Would the gain take you into higher rate tax if top slicing relief not claimed?

Yes it would!

[Deleted User]

Whereabouts on the form are you putting the gain? It actually should be included on a supplementary section.

JeffMason

In 'other Uk income' - 'gains from life insurance policies...' and then under 'UK policy or contract gains on which tax was treated as paid', and the 'number of years the policy has been held' under that...

[Deleted User]

JeffMason said:

In 'other Uk income' - 'gains from life insurance policies...' and then under 'UK policy or contract gains on which tax was treated as paid', and the 'number of years the policy has been held' under that...

Seems fine - I think that you will have to provide some figures to us in order to establish the issue. 

JeffMason

I was expecting zero tax due, but they system has suggested an amount.

I earned less than 28k during that tax year. The gain is 85k but held for 11 years and basic rate tax paid. I was told top slicing is dividing the gain by the years held - so 7727, then adding that to my income that year - so 35727, and because that total is less than higher rate tax, nothing extra should be due...

But the return has suggested that I owe approx 1300.

Have i been misinformed about how this works?

[Deleted User]

JeffMason said:

I was expecting zero tax due, but they system has suggested an amount.

I earned less than 28k during that tax year. The gain is 85k but held for 11 years and basic rate tax paid. I was told top slicing is dividing the gain by the years held - so 7727, then adding that to my income that year - so 35727, and because that total is less than higher rate tax, nothing extra should be due...

But the return has suggested that I owe approx 1300.

Have i been misinformed about how this works?

Have you entered the basic rate tax paid on the 7727? Doesn’t look like it.

JeffMason

I've just entered the total gain (85k) and the years policy held (11). Is there another box I need to fill in?

[Deleted User]

When you go to ‘View your calculation’ - what do you see in relation to the policy gain. You should see two entries -

minus - Top Slicing Relief
minus - Notional Tax from Gains on Life Policies etc

JeffMason

The numbers I gave you above were rounded down, so the numbers below wont be an exact match but...

Minus top slicing relief - 13930
minus notional tax from gains - 17184