Two bond gains in one tax year: how top-slicing aggregates them

Two or more chargeable event gains in the same tax year are top-sliced together, in one computation. The relief is not worked out bond by bond. IPTM3840 keeps each gain's own number of complete years: divide each gain by its own N, sum those annual equivalents into one combined slice, tax that slice at notional income, then scale the result back up by the ratio of total gain to total slice.

HMRC's own two-bond example

IPTM3850 Example 2: in 2022/23, with £40,000 of employment income, two onshore bonds are surrendered — a £50,000 gain before any TAR over five complete years and a £10,000 gain before any TAR over four.

Worked-example basis: No time-apportioned reduction is due for any gain or policy shown. TAR is not calculated or applied. Raw gains are shown before any TAR.

Our engine reproduces HMRC's £8,185.20, and the case is re-checked on every change. The figure to notice is the £12,500: it's a sum of slices, each computed with its own years.

IPTM3840 · IPTM3850 Example 2 · ITTOIA 2005 s.536

The common error: one averaged N

The tempting shortcut is to pool the gains (£60,000) and divide by a single “average” N — usually gain-weighted. On this example a weighted-average N rounds to 5, giving a £12,000 annual equivalent and relief of £8,616. That is £430.80 away from HMRC's published answer, in the taxpayer's favour, on an example HMRC printed precisely so the method would be unambiguous. A compliance check that re-works the case against IPTM3850 will find the difference.

A sharper point sits underneath this. The law puts onshore and offshore gains in the same year into one combined aggregation (ITTOIA 2005 s.537; IPTM3840), and ParaplanAI calculates a year with both onshore and offshore gains in that one combined calculation, each gain over its own number of complete years. Inside the relief calculation every gain, onshore or offshore, is treated as having basic-rate tax paid (ITTOIA 2005 s.531(1) applies s.530(1) to a foreign gain for that purpose; IPTM3830). The two types part company only in the real, final liability: offshore gains are taxed as ordinary savings income with no basic-rate credit, while onshore gains are taxed as the highest part of income and carry basic-rate tax treated as paid (IPTM3810), reduced where the personal allowance is set against them (ITTOIA 2005 s.530(3)–(5)).

Running each bond type through its own separate calculation is not a statutorily equivalent substitute: each separate calculation omits the other type's gain from the shared band stack — the basic, higher and additional-rate thresholds, the personal savings allowance and the starting rate for savings — so neither reproduces the single combined aggregation IPTM3840 requires. That is why every gain of the year goes into the one calculation.

For 2026-27 the calculator does not yet take a year with both onshore and offshore gains. Its onshore basis for that year covers a single onshore gain, so a 2026-27 year with gains of both types is refused rather than estimated, as a 2026-27 year with more than one onshore gain already is.

Modelling a multi-gain year? The top-slicing relief calculator handles a single gain; multiple gains and the full aggregation working run in the bond workbench (free account). For 2026/27 the workbench combines offshore gains only; onshore plus offshore in the same year, or more than one onshore gain, is not supported yet.

ITTOIA 2005 s.537 (aggregation of gains) · IPTM3840 · IPTM3850 Example 2