Investment bond gains and the 2027 savings-rate rise

For the 2027/28 tax year, 6 April 2027 to 5 April 2028, Finance Act 2026 s.5 sets the savings basic rate at 22%, the savings higher rate at 42% and the savings additional rate at 47%. For 2026/27 the savings rates are 20%, 40% and 45%. HMRC’s technical note on the change says the new savings rates apply UK-wide. A chargeable event gain on an investment bond is savings income (ITA 2007 s.18), so a gain arising in 2027/28 is taxed at the new rates.

Finance Act 2026 s.5 · ITA 2007 s.18

The onshore credit moves with the savings basic rate

On a UK (onshore) policy, the individual is treated as having paid income tax at the basic rate on the gain. Finance Act 2026 replaces “the basic rate” in that rule with “the savings basic rate”, with effect for 2027/28 and later tax years. For 2026/27 the credit is 20%; for a gain arising in 2027/28 it is 22%. The tax treated as paid is still not repayable where it exceeds the tax due. A foreign (offshore) policy generally carries no such credit against the real liability, so an offshore gain arising in 2027/28 is usually taxed at the 2027/28 savings rates with no credit to set against it.

ITTOIA 2005 s.530 · ITTOIA 2005 s.531 · Finance Act 2026 Sch 1 para 44 · IPTM3810

Top-slicing relief for a 2027/28 gain

A gain is charged for the tax year in which it arises. Top-slicing relief compares the individual’s liability for that tax year with a relieved liability built from the annual-equivalent slice of the gain. Finance Act 2026 also substitutes “the savings basic rate” for “the basic rate” in the relief provisions (sections 535(3), 536 and 537 of ITTOIA 2005), again for 2027/28 onwards. For a gain arising in 2027/28 the relief calculation therefore runs at the 2027/28 savings rates. HMRC’s guidance recalculates the personal savings allowance and the starting rate for savings inside the relief, with only the sliced gain included, for gains arising in 2021/22 onwards. In 2026/27 the personal savings allowance is £1,000 for a basic-rate taxpayer, £500 at higher rate and nil at additional rate, and the starting rate for savings band is £5,000; the savings allowances guide shows how they are recalculated inside the relief.

Because both sides of the relief comparison move to the new rates, the effect on a given case depends on the whole income picture. This article does not give a general figure for it: the calculators produce the numbers, and they have no 2027/28 configuration yet.

ITTOIA 2005 s.463 · ITTOIA 2005 ss.535–537 · IPTM3820

Timing across 5 April 2027: what can be checked now

Which year’s rates apply turns on the date the chargeable event is treated as happening, not on when the money is paid. A full surrender, maturity or a death giving rise to benefits is itself the event. A part-surrender excess is different: it is treated as arising at the end of the insurance year, so a withdrawal made before 6 April 2027 can give a gain charged in 2027/28. The chargeable event gain guide works through that timing rule.

The facts an adviser can gather now are the policy’s anniversary date, whether it is onshore or offshore, the withdrawals taken against the cumulative 5% allowance in the current insurance year, and the client’s expected income in each of the two tax years. Whether an event falls before or after 6 April 2027 is a planning question for the adviser and the client. The tools illustrate the tax on a stated set of facts; they do not recommend a timing.

ITTOIA 2005 s.484 · IPTM3560

The January self-assessment return

For the tax year 6 April 2025 to 5 April 2026, the online filing and payment deadline is 11:59pm on 31 January 2027 (the gov.uk Self Assessment deadlines page, checked 27 September 2026). The gains on that return arose in that year and are taxed at that year’s rates; the 2027/28 rates do not apply to them. A gain arising in 2027/28 is reported on the 2027/28 return, which follows the same rule of online filing by 31 January after the tax year ends. The reporting guide covers where a gain goes on the return.

TMA 1970 s.8

What the calculators use today

The calculators run on ParaplanAI’s versioned tax-year configurations, the latest of which is 2026/27, with savings rates of 20%, 40% and 45% and an onshore credit of 20%. The 2027/28 savings rates are not in the calculators until a 2027/28 configuration is ratified, so an event dated in 2027/28 cannot yet be run at 2027/28 rates. For a gain arising in a configured year, the chargeable event gain calculator works out the gain, the top-slicing relief calculator works out the relief, and the onshore and offshore bond tax calculators show the tax on the gain for each kind of policy.

Interest held outside a bond, in a general investment account, is savings income too, so the 2027/28 rates reach it as well. That reopens the tax comparison between a bond and other wrappers. The wrapper tax comparison calculator sets the treatments side by side on the configured years, and the bond versus ISA guide explains the mechanics. For planning and illustration only; this article does not constitute financial or tax advice.