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Two bond gains in one tax year: how top-slicing aggregates them
Each gain keeps its own N. The slices are summed, the relief is apportioned — and the popular weighted-average-N shortcut gets a different, wrong answer.
6 min read · Last reviewed
When two or more chargeable event gains fall in the same tax year, top-slicing relief is computed once, across all of them — not once per bond. The method in 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, compute the tax on that combined 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 over five complete years and a £10,000 gain over four.
- Gain 1 ÷ N (£50,000 ÷ 5)
- £10,000
- Gain 2 ÷ N (£10,000 ÷ 4)
- £2,500
- Combined annual equivalent
- £12,500
- HMRC’s published top-slicing relief
- £8,185.20
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 — £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 second, sharper boundary: onshore and offshore gains in the same year can't be poured into one aggregation. The onshore 20% basic-rate credit applies to onshore gains only, and once the slices are combined there's no clean way to apply it to half the figure. Run the two computations separately and present them side by side — our engine refuses the mixed case outright rather than producing a blended wrong answer.
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.
Aggregation method: ADR-028 (sum of slices, supersedes weighted-N) · mixed-type block: BH-044
Related reading
Grounding & sources
- Worked example: HMRC IPTM3850 Example 2 (“Amanda”) — two onshore gains £50,000/5yrs + £10,000/4yrs, employment £40,000, 2022/23; HMRC’s published TSR £8,185.20. The engine reproduces it byte-equal (calc-engine/bond/__tests__/top-slicing.multi-gain.test.ts; ADR-028).
- Wrong-method figure (£8,616 via gain-weighted average N): the superseded ADR-014 approach, recorded in the corpus notes for IPTM-HMRC-EX2 (calc-engine/corpus/iptm-corpus.json).
- Mixed onshore/offshore hard block: BH-044 (locked operator decision 2026-05-12), calc-engine/bond/aggregation.ts.
- Rule basis: IPTM3840 (multiple gains), IPTM3850 Example 2, ITTOIA 2005 s.536.
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.