Chargeable gain event - reporting to HMRC

mead18

Can anyone help? I will have a chargeable gain event soon when I cash in an inherited bond, by using top-slicing this will NOT take me above the basic rate tax threshold so according to a financial advisor there will be no tax to pay.

The financial advisor says no need to report to HMRC via self-assessment (I have never been required to do self-assessment as I've always paid tax via employment).

Please can people tell me - is this correct? I don't want to get this wrong.

Be kind to me, last time I posted I got some unkind replies.

poseidon1

Don't wish to appear unkind, but you have provided no hard data to offer a view ie -

1. What is your own taxable income in this tax year prior to bond encashment?
2. How much is the gain on the bond?
3. How many years has the bond been in exsistence?
4. Was the bond UK based ( ie taxed in the UK ) or offshore and untaxed?
5. Is there any reason you cannot split the encashment between this tax year and the next if that would produce a tax beneficial outcome?

mead18

I know the bond is NOT taxable. My question is - do I need to report to HMRC even if no tax is due? I can't find clear rules anywhere.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81890162#Comment_81890162

If you know the bond is "NOT taxable" then why do you think there could possibly be any tax consequences 🤔

Or have you said not taxable when you really mean something entirely different?

mead18

For example, savings income is reported to HMRC but no tax if it is under a certain amount.

Does a chargeable gain event need to be reported to HMRC even though no tax is due.

Linton

https://forums.moneysavingexpert.com/discussion/comment/81891132#Comment_81891132

No. The povider should inform HMRC and HMRC will determine how much tax is due.

greysilver

Taking a slightly different view, HMRC publish a help sheet "HS320 Gains on UK life insurance policies (2026)". Section 6.1 gives some guidance on what to report. Roughly, if your savings income, including the chargeable gain (before top slicing) exceeds £10,000, then you should do a self assessment return. Otherwise, you should tell HMRC by phone or letter. It appears that consideration of whether or not there is extra tax to pay does not form part of the guidance.

There is another potentially unpleasant consequence. If, when you add all your income, interest, and chargeable gain (before top slicing) together, you exceed the personal allowance + basic rate band, then you become a higher rate tax payer. And if you are a higher rate tax payer, then the Personal Savings allowance falls from £1000 to £500. So you may end up paying more income tax on bank interest.

The fact that the top slicing calculation may result in you not paying any tax at a higher rate doesn't matter. You still earn the badge of being a higher rate tax payer and your personal savings allowance falls as a result.