investment bond - top slicing - tax due

[Deleted User]

Can I ask what your personal allowance was on that calculation? Was it 12500?

JeffMason

[Deleted User] said:

Can I ask what your personal allowance was on that calculation? Was it 12500?

I'm not sure... Where do I find that information?

[Deleted User]

At the top of the calculation. Income from employment, Gain on Life policy of 85920 minus personal allowance = total income on which tax is due. 

What is the figure for personal allowance? 

JeffMason

[Deleted User] said:

At the top of the calculation. Income from employment, Gain on Life policy of 85920 minus personal allowance = total income on which tax is due. 

What is the figure for personal allowance? 

Income from employment is 27516
minus reduced personal allowance is 5782

[Deleted User]

JeffMason said:

purdyoaten2 said:

At the top of the calculation. Income from employment, Gain on Life policy of 85920 minus personal allowance = total income on which tax is due. 

What is the figure for personal allowance? 

Income from employment is 27516
minus reduced personal allowance is 5782

As I suspected. I think that we may have a problem here and so suspect that the HMRC calculation is incorrect. The calculation states that, without top slicing relief, your liability would be 31114 on the gain. I don’t get that. To bring it down to the basic rate of 17184 they have given relief of 13930. (31114 - 13930 = 17184) If you check your calculation you should see that nothing has been charged at 40%.

However your personal allowance has been restricted because your income has exceeded £100000. But this has only happened as a result of the policy . I believe that this is incorrect. See attached particularly this paragraph:

‘How HMRC calculates Top-slicing Relief has changed. If your personal allowance has reduced due to a chargeable event gain being included in your income for the year, you may now be entitled to more relief’

It suggests that you are required to complete a paper return (we are now past the deadline). I will have a think about this as to how one rectifies this. Can you post your exact salary?

Anyone else any thoughts on this?


https://www.gov.uk/government/publications/gains-on-uk-life-insurance-policies-hs320-self-assessment-helpsheet/hs320-gains-on-uk-life-insurance-policies-2020

[Deleted User]

It appears that this also confirms my last post:

https://haysmacintyre.com/insights/life-insurance-policy-gains-full-personal-allowance-available/

JeffMason

Thank you so much for your help on this!

I saw something about the change and the paper return earlier today but wasn't sure if it had anything to do with my issue, how to know for sure, or what to do about it if it did.

This change came about in 2020 I think. I would have assumed they would have fixed the online calculation system by now, so this wouldn't still be happening, but apparently not...

My exact salary is £27516 as mentioned above. The exact gain is £85920 and the onshore bond has basic rate tax already paid and was held for 11 years.

[Deleted User]

So income is 113436. Personal allowance restricted by £1 for every £2 over £100000. Restricted by 6718 to 5782. It shouldn’t have been in my opinion.

JeffMason

[Deleted User] said:

So income is 113436. Personal allowance restricted by £1 for every £2 over £100000. Restricted by 6718 to 5782. It shouldn’t have been in my opinion.

Agreed. The question is how do I adjust this?

JeffMason

it is impossible to get through to HMRC helplines and so I have posted about this on the self-assessment forum. I'm not sure what else to do at this point. It's crazy that this is still an issue when the changes were brought into place in March 2020.