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 to the penny, and the case runs in CI on every commit. 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 boundary sits underneath this. Onshore and offshore gains in the same year cannot be poured into one aggregation. Note where the difference now sits: inside the relief calculation both types take the same restricted basic-rate deemed-tax credit (ITTOIA 2005 s.531(1) applies s.530(1) to a foreign gain for that purpose), so the split that survives is in the real, final liability, where only the onshore gain keeps a credit. One aggregation cannot carry two real-liability credit regimes at once, so the engine hard-blocks the mixed case rather than producing a blended wrong answer.

Running each bond type through its own separate calculation is nota statutorily equivalent substitute, and the engine's error says so: 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. A genuinely mixed portfolio needs manual aggregation, and the calculation should say so on its face.

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).

Aggregation method: ADR-028 (sum of slices, supersedes weighted-N) · mixed-type block: BH-044