Top slicing relief on policy

olbas_oil

I may soon cash in a policy that will have a chargeable gain of about £3k. The number of complete policy years is 26. Am I correct in understanding that top-slicing relief means I will be taxed, as income, on 3000 / 26 = £115?
If top-slicing relief assumes that the gain is spread evenly across the years, then what happens to the assumed gains from earlier years?

Linton

olbas_oil said:

I may soon cash in a policy that will have a chargeable gain of about £3k. The number of complete policy years is 26. Am I correct in understanding that top-slicing relief means I will be taxed, as income, on 3000 / 26 = £115?
If top-slicing relief assumes that the gain is spread evenly across the years, then what happens to the assumed gains from earlier years?

Assuming this is an onshore investment bond....

Generally investment bond gains taxation assume that the bond manager has already paid any basic rate tax due.

The top slicing calculation only comes into play if the chargeable gain,taxed as income in the current year, moves you into a higher tax rate than would be the case without the gain, normally basic rate tax moving to higher rate..   So it is usually only the higher rate component of any tax due which is affected though apparently there could be complications with savings allowance.

The calculation is done on the average annual gain and covers all previous untaxed gains.  This sounds like a wonderful deal but dont forget that basic rate income tax has already been paid.

If you gave us some figures on your income tax position it should be possible to explain better.