Top Slicing Relief Problems

Dr_Dr

I have spent weeks trying to determine the annual tax due for 2023/2024. Because a bond was surrendered, I have been unable to determine the precise sequence of the calculations. I have seen many examples, including some on the MSE site, but none seem to reflect my situation. Details are as follows …

Income - £6,395

Interest on savings - £5,909

Dividends - £0

Basic Allowance - £11,310 (after transfer to partner)

Onshore UK insurance bond held for 30 full years.

Bond cost - £16,000

Bond sale - £70,280

Bond Gain - £54,280

TSR - £1809 ???

I would very much appreciate it if someone could complete the annual tax calculation showing the sequence of events.

Dazed_and_C0nfused

Dr_Dr said:

I have spent weeks trying to determine the annual tax due for 2023/2024. Because a bond was surrendered, I have been unable to determine the precise sequence of the calculations. I have seen many examples, including some on the MSE site, but none seem to reflect my situation. Details are as follows …

Income - £6,395

Interest on savings - £5,909

Dividends - £0

Basic Allowance - £11,310 (after transfer to partner)

Onshore UK insurance bond held for 30 full years.

Bond cost - £16,000

Bond sale - £70,280

Bond Gain - £54,280

TSR - £1809 ???

I would very much appreciate it if someone could complete the annual tax calculation showing the sequence of events.

Where have you got £1809 from??

That seems like a (1/30th) slice of the gain rather than TSR.

And was any notional tax shown on your Chargeable Event report?

Ferro

Dazed_and_C0nfused said:

Dr_Dr said:

I have spent weeks trying to determine the annual tax due for 2023/2024. Because a bond was surrendered, I have been unable to determine the precise sequence of the calculations. I have seen many examples, including some on the MSE site, but none seem to reflect my situation. Details are as follows …

Income - £6,395

Interest on savings - £5,909

Dividends - £0

Basic Allowance - £11,310 (after transfer to partner)

Onshore UK insurance bond held for 30 full years.

Bond cost - £16,000

Bond sale - £70,280

Bond Gain - £54,280

TSR - £1809 ???

I would very much appreciate it if someone could complete the annual tax calculation showing the sequence of events.

Where have you got £1809 from??

That seems like a (1/30th) slice of the gain rather than TSR.

And was any notional tax shown on your Chargeable Event report?

Indeed. The tax liability needs to be calculated with the full £54280 taxable. 

Then one works out the tax liability using £1809 taxable, ignoring the £54280. 

The TSR is the difference. 

The full gain is entered on the return and TSR is claimed as above. 

Dr_Dr

I was led to believe that the £1809 was the taxable amount as 1/30 of the chargeable gain, but did not know where it fitted into the overall annual tax calculation. I do not have a chargeable event report. Cannot ever remember receiving one, but will request one.

Ferro

Dr_Dr said:

I was led to believe that the £1809 was the taxable amount as 1/30 of the chargeable gain, but did not know where it fitted into the overall annual tax calculation. I do not have a chargeable event report. Cannot ever remember receiving one, but will request one.

It could well be the case that there is NO CHARGEABLE gain as the policy went to maturity - who calculated the gain of £54280? Or was this your own estimate? Ring the provider to find out. 

If no chargeable gain you have no need to declare anything. 

If there is, as determined by the chargeable event certificate then:

As I stated before - you declare the total gain before TAR . It is entered in the 

‘Other Income not included in Supplementary pages’ section. 

. In the additional information box you detail the gain, relevant years and TSR due.

https://assets.publishing.service.gov.uk/media/642c0ac77de82b000c31355c/SA100_tax_return_English_2023.pdf

This will be scrutinised by the technical team at HMRC and the relevant adjustments will be made to your tax liability. 

Dr_Dr

The policy did not run to maturity.
Well, the calculation was determined by a financial advisor, based on his advice we did surrender the policy, he said the chargeable gain was the difference between the purchase and sale price and TSR £1809. He was expensive and I still came away not understanding the annual overall tax situation. He seemed more concerned about whether total income would exceed £100k. I am not confident that he had any expertise in this area (it took him sometime to come up with the advice) and am reluctant to use him again, which is why I have come to MSE forum! I have now contacted the insurers and they will send the chargeable event certificate today.

Ferro

Dr_Dr said:

The policy did not run to maturity.
Well, the calculation was determined by a financial advisor, based on his advice we did surrender the policy, he said the chargeable gain was the difference between the purchase and sale price and TSR £1809. He was expensive and I still came away not understanding the annual overall tax situation. He seemed more concerned about whether total income would exceed £100k. I am not confident that he had any expertise in this area (it took him sometime to come up with the advice) and am reluctant to use him again, which is why I have come to MSE forum! I have now contacted the insurers and they will send the chargeable event certificate today.

Good - that’s the starting point. If there is a chargeable event, my advice remains as in my earlier post. 

Jeremy535897

The concern about income including the chargeable event reaching £100,000 was a valid one as the personal allowance is still withdrawn.

Dr_Dr

Well I finally received the Certificate of Chargeable Gain
It shows ...
Single Premium (13/05/1993) payment of £16,000
Surrender Value Paid (30/05/2023) payment of £70,280.64
Less Previously Notified N/A
Amount of Chargeable Gain arising £54,280.64

Dazed_and_C0nfused

Dr_Dr said:

Well I finally received the Certificate of Chargeable Gain
It shows ...
Single Premium (13/05/1993) payment of £16,000
Surrender Value Paid (30/05/2023) payment of £70,280.64
Less Previously Notified N/A
Amount of Chargeable Gain arising £54,280.64

Any notional tax credit?

Ferro

Dazed_and_C0nfused said:

Dr_Dr said:

Well I finally received the Certificate of Chargeable Gain
It shows ...
Single Premium (13/05/1993) payment of £16,000
Surrender Value Paid (30/05/2023) payment of £70,280.64
Less Previously Notified N/A
Amount of Chargeable Gain arising £54,280.64

Any notional tax credit?

Generally not shown on a certificate. 

Looks to me like 5% withdrawals made every year?