Death, Investment bonds, Chargeable Gains, Top Slicing and Income Tax

Twisted_Melon

My mother recently passed away and I've been collecting documents and information to complete IHT400. I think I should probably include a figure for income tax for the year of death.

I've been doing my homework, reading and going through worked examples. I was hoping someone with experience could just provide a quick sanity check. 

Example 3 from IPTM3850 seems to be the closest match when using the following numbers.

State pension £5000

Employee pension £2000 (taxed 50% at source)

Savings Investment Income £10000

Onshore investment bonds - Chargeable gains $150000

Held bonds for 20 years, yearly withdrawal less than %5.

At the end of step 4 when calculating 'relieved liability' I get a negative number in this case -£314, Should this be possible? Should the answer be recorded as £0? 

Top slicing Relief is then equal to total liability (£27953) and when tax treated as paid is included,

tax due on chargeable event gains becomes zero.

As I understand it, final tax is still calculated as an additional rate earner ie. no allowances. 

This would be (£5000 + £2000 +£10000 x 20%) = £3400

Less £1000 taxed at source = £2400

Does my understanding seem correct? Do my numbers look plausible? 

Thank you your time.

Jeremy535897

Without working it all out, that looks right. 

Twisted_Melon

Thanks, 

One more question if I may. 

When completing self assessment additional information form SA101, where do I write the calculated Top Slicing Relief?

Nomunnofun1

Twisted_Melon said:

Thanks, 

One more question if I may. 

When completing self assessment additional information form SA101, where do I write the calculated Top Slicing Relief?

In the ‘Any other information box’ - (as directed in the Other Income section)

Twisted_Melon

I'm sorry, I'm not seeing how you came to this answer from information given on the forms.

'Other UK income not included on supplementary pages' says "Do not use this section for income that should be returned on supplementary pages". Guidance from the HMRC community forums says I need to complete form SA101. ie supplementary pages.

Q 21, The only place i find reference to 'any other information', shouldn't apply. Following instructions I am not supposed to complete this section of the form.

Thank you for taking the time to answer my question, but i feel it necessary to ask how you arrived at your answer.

Nomunnofun1

Twisted_Melon said:

I'm sorry, I'm not seeing how you came to this answer from information given on the forms.

'Other UK income not included on supplementary pages' says "Do not use this section for income that should be returned on supplementary pages". Guidance from the HMRC community forums says I need to complete form SA101. ie supplementary pages.

Q 21, The only place i find reference to 'any other information', shouldn't apply. Following instructions I am not supposed to complete this section of the form.

Thank you for taking the time to answer my question, but i feel it necessary to ask how you arrived at your answer.

Yes - I have confused you - should have said ‘any additional information box’ , not ‘other information’ box. 

Anyway:

The full amount of the gain should be entered in this section together with the number of complete years.
 If you are due any top slicing relief it will then be automatically calculated using the information provided. 

View your calculation before submission. 

Twisted_Melon

Do you mean additional information form? 

I was told on the phone that i would need to calculate top slicing relief myself. There are a couple of users on the HMRC forums that have followed advice similar to yours, and now face a lengthy wait to claim back overpaid tax. 

Nomunnofun1

Twisted_Melon said:

Do you mean additional information form? 

I was told on the phone that i would need to calculate top slicing relief myself. There are a couple of users on the HMRC forums that have followed advice similar to yours, and now face a lengthy wait to claim back overpaid tax. 

Form/section - yes! 

There isn’t any other option I am afraid and I have been doing this for 26 years (although the SA 101 is relatively new).

In your case there shouldn’t be an issue as it is clear that no additional tax arises from the Chargeable Event. 

Bobziz

I've just gone through this process and at no point did I need to submit a top slicing relief calculation. HMRC did that for me.

Nomunnofun1

Bobziz said:

I've just gone through this process and at no point did I need to submit a top slicing relief calculation. HMRC did that for me.

As I said earlier it is automatically calculated during the return completion. This is a relatively recent innovation. Previously one had to calculate it and supply full details of the calculation in the additional information section at the end of the return. 

Twisted_Melon

Does this automatic completion of the top slicing calculation also happen when a form is returned by post, as required after death?

My conversation with HMRC went something like this.

Me: So I need to complete forms SA100 and SA101

HMRC: Yes

Me: I believe, some top slicing relief is due, is that calculated by you?

HMRC: No

Me: .....? You mean, I have get an accountant or do that complicated calculation myself.

HMRC: That's up to you.

Me:....Oh!

HMRC: It's called 'self' assessment for a reason. 

....

Perhaps I was dreaming, his voice had that over-confident, arrogant tone of someone you shouldn't trust.

I will call them again closer to the time of submission, some of these investment companies are dragging their feet.

Thanks again