What you need to know about top-slicing relief

The general understanding of how top-slicing relief works has changed in recent times - but the legislation has not.
October 2019

Barry Foster

Vice President,
Strategic & Technical Sales

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Risk Disclaimer

This content is based on our understanding of legal and tax regulations and practice at the time of writing (October 2019). It has been produced for information only. We do not provide tax, accounting, regulatory or legal advice. No action must be taken or refrained from being taken based on this content alone. Case studies are for illustrative purposes only.

Key takeaways:

  • An understanding of how the top-slicing relief calculation works
  • Relationship between top-slicing relief and the Personal Savings Allowance
  • Why the First Tier Tax Tribunal decision in Silver v HMRC is significant

The general understanding of how top-slicing relief works has changed in recent times – but the legislation has not.

Top slicing relief is a very valuable feature of investment bond taxation. It turns out, however, that for many years we may not have fully understood how it works.

Historically most of us had the following understanding of top slicing relief:

  • Where an investment bond chargeable event gain (when added to other income) sits entirely within a tax band (basic rate, higher rate or additional rate) top slicing relief is not available.
  • Top slicing relief is available only where the gain straddles tax bands (for example, where a client’s ‘other’ income sits within the basic rate band, but the chargeable event gain sits part in basic rate and part in higher rate).
  • Top slicing relief is therefore a relief against higher or additional rate tax.

So how does top-slicing actually work? Download our explanation and case studies.

Risk Disclaimer

This content is based on our understanding of legal and tax regulations and practice at the time of writing (October 2019). It has been produced for information only. We do not provide tax, accounting, regulatory or legal advice. No action must be taken or refrained from being taken based on this content alone. Case studies are for illustrative purposes only.