Top-slicing relief calculator

The gain entering the five-step computation may first be affected by TAR. Whether TAR is due can depend on relevant residence, beneficial ownership or assignments, rights held as security, and trust or estate history; UK residence throughout the policy term alone is not enough. This calculator does not calculate TAR and is limited to gains for which no TAR is due: with nothing ticked it assumes that, and says so beside the figure.

Top-slicing relief stops a bond gain that accrued over many years being taxed as though it all arose in one. It works in five steps. First, tax the gain as the top slice of total income, with the personal allowance at the level it has once the gain is included; second, take off the basic-rate tax treated as paid on the gain, which leaves the tax attributable to the gain; third, find the annual equivalent: the gain divided by complete years N; fourth, tax that one slice at a notional income level (the member's other income plus the one-year slice, not the whole gain), with the personal allowance worked out at that level, take off the basic-rate tax treated as paid on the slice, and scale the result back up by N (the relieved liability); fifth, the relief is the excess of the attributable tax over the relieved liability, floored at zero.

For gains arising on or after 6 April 2021, the Personal Savings Allowance and the starting rate band are recalculated from scratch inside Step 4, at the notional income level — not carried forward from Step 1. A higher-rate taxpayer at Step 1 (PSA £500) can be a basic-rate taxpayer at Step 4 (PSA £1,000). Whether the larger allowance changes the relief depends on the case: on the worked example on this page it does not, because the basic-rate tax treated as paid already covers the tax on the slice. In the worked example, and for your own case once the certificate question is answered, the tool above prints both PSAs so the recalculation is visible.

An onshore bond carries a deemed basic-rate credit — the life fund is treated as having already paid tax — so against the member's real liability they pay only the excess over basic rate. An offshore bond carries no credit against that real liability, so the whole charge lands with the member. For a credited onshore gain, ITTOIA 2005 s.465A and ITA 2007 s.1012 also put the gain above dividend income as the highest part of the real main calculation. That real-main figure is kept separate from the s.535 relief working shown by the tool.

Inside the relief computation the position is different, and the difference is easy to miss. ITTOIA 2005 s.531(1) is an express carve-out: for the purpose of calculating relief under s.535, the s.530(1) deemed credit applies to offshore and foreign policy gains too. So the credit is taken off in working out both the tax attributable to the gain and the tax on the slice at Step 4, whichever bond type is in front of you — the tool prints the same relief figure for an identical onshore and offshore case, and only the net tax diverges.

The credit is also not a flat 20% of the gain. Under s.530(3)–(5) it is restricted to basic rate on the gain (or, at Step 4, the slice) less any personal allowance set against it, and it can never take the tax below nil, and credit left over after the year’s whole income tax cannot be repaid.

Some cases need additional facts or separate workings. Check the limits below before relying on the figures.

• Other gains in the same tax year. The tool relieves one gain. Where the client has two or more chargeable event gains in the year, the relief is worked out on all of them together (s.537); the bond workbench does that for onshore gains, offshore gains or both, except in 2026/27, when it can combine offshore gains only.
• Income left out of the relief calculation. A termination payment taxed as employment income under ITEPA 2003 s.403, and lease premiums and similar receipts taxed as UK property business profits, are left out of total income inside the relief calculation but still count for the tax due (s.535(5)). The tool uses the same income for both, so it cannot apply that.
• How the complete years are counted. The tool uses the number of complete years (N) you enter and does not count it. On a later part surrender or assignment N usually runs from the previous such event (s.536(2)). An offshore bond issued before 6 April 2013 still runs from the start of the policy, unless on or after that date it was varied to increase its benefits (exercising a right counts), assigned to the client or into or out of a trust (HMRC IPTM3731 counts both), or used as security for the client's debt (FA 2013 Sch 8 para 7(2)-(3)); then N runs from the previous event as usual. Where the bond was issued in place of, or under an option in, an earlier policy it is counted from the earliest related policy (s.536(4)). Take N from the certificate. Learn explains how N is counted and how to read the certificate. A time-apportioned reduction (TAR) can also change the gain that enters the calculation: what TAR is.
• Scottish taxpayers. Choose Yes in the calculator: a Scottish taxpayer's salary, pension and other non-savings income is taxed at Scottish rates. The gain and top-slicing relief remain available. Tax totals and the combined band working are withheld; net additional tax is shown only where the calculation provides the reviewed evidence needed to confirm it. Otherwise use a separate Scottish tax calculation.
• UK trustees. The tool is for individual policyholders, including a settlor charged on a trust's gain as their own income. UK trustees get no top-slicing relief; the onshore and offshore bond tax calculators cover them.