What is time-apportionment relief?

A reduction in an offshore-bond chargeable event gain for the part of the policy term during which the policyholder was not UK-resident (ITTOIA 2005 s.528). The gain is scaled down by the proportion of the relevant period spent non-resident, so only the UK-resident share is taxed.

Does time-apportionment relief apply to onshore bonds?

No. It is an offshore-bond relief. An onshore (UK) bond’s fund is taxed internally, so there is no equivalent reduction for periods of non-residence — the whole gain is taxable on a UK-resident at the chargeable event.

How is the reduction calculated?

Broadly, the gain is multiplied by the number of days in the relevant period that the policyholder was non-UK-resident, divided by the total days in that period. A policyholder non-resident for 3 of 10 years would see roughly a 30% reduction, with the remaining 70% chargeable.

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Time-apportionment relief: cutting an offshore bond gain for years spent non-resident

A gain that built up while the policyholder lived abroad isn’t fully UK-taxable. Time-apportionment relief scales the offshore-bond gain down by the share of the term spent non-resident.

Based on ITTOIA 2005 s.528 and HMRC’s Insurance Policyholder Taxation Manual (IPTM3700).

5 min read · Last reviewed 19 Jun 2026

An offshore bond gain that built up partly while the policyholder lived abroad isn't fully UK-taxable. Time-apportionment relief reduces the gain by the share of the policy term during which the policyholder was non-UK-resident — so a globally-mobile client is taxed only on the UK-resident portion of the growth.

The rule

Under ITTOIA 2005 s.528 (IPTM3700), the chargeable event gain on an offshore policy is reduced in proportion to the time the policyholder was not UK-resident over the relevant period of ownership. Broadly: chargeable gain = full gain × (days UK-resident ÷ total days). The relief exists because an offshore fund rolls up gross and the policyholder may have accrued much of the growth while outside the UK tax net entirely; it would be wrong to tax the whole of it on a later UK-resident surrender.

It is offshore-only. An onshore (UK) bond's life fund is taxed internally as it grows, carrying the deemed 20% credit, so there is no time-apportionment reduction — the whole gain is chargeable on a UK-resident at the event.

A worked example

Illustrative (a transparent application of the s.528 proportion — ParaplanAI does not yet compute time-apportionment, so this is not an engine figure): a £60,000 offshore gain over a ten-year term, the policyholder non-UK-resident for three of those years.

Time-apportionment relief — illustrative · £60,000 gain / 10-year term

Full chargeable gain: £60,000
Years non-UK-resident: 3 of 10
Reduction (3 ÷ 10 × £60,000): £18,000
Reduced chargeable gain: £42,000

The £18,000 attributable to the non-resident years drops out, leaving £42,000 chargeable — and that reduced figure is what then goes into top-slicing relief.

The common error

The errors are applying it to an onshore bond (there is no such relief), and forgetting it altogether for a client with a period of non-residence — leaving a materially overstated gain. The relief turns on the policyholder'sown residence history over the ownership period, not the fund's location alone. The onshore/offshore split that decides whether the relief is even available is in onshore vs offshore bonds; build the underlying gain on the chargeable event gain calculator. (ParaplanAI computes the gain and top-slicing; the time-apportionment reduction is applied manually for now.)

ITTOIA 2005 s.528 · IPTM3700 (time apportionment) — figure illustrative, not engine-computed

Common questions

What is time-apportionment relief?: A reduction in an offshore-bond chargeable event gain for the part of the policy term during which the policyholder was not UK-resident (ITTOIA 2005 s.528). The gain is scaled down by the proportion of the relevant period spent non-resident, so only the UK-resident share is taxed.
Does time-apportionment relief apply to onshore bonds?: No. It is an offshore-bond relief. An onshore (UK) bond’s fund is taxed internally, so there is no equivalent reduction for periods of non-residence — the whole gain is taxable on a UK-resident at the chargeable event.
How is the reduction calculated?: Broadly, the gain is multiplied by the number of days in the relevant period that the policyholder was non-UK-resident, divided by the total days in that period. A policyholder non-resident for 3 of 10 years would see roughly a 30% reduction, with the remaining 70% chargeable.

Sources & grounding

Rule: an offshore-bond gain is reduced by the proportion of the policy term during which the policyholder was non-UK-resident (ITTOIA 2005 s.528; IPTM3700) — the engine’s TIME_APPORTIONMENT_CITATION (calc-engine/bond/gain.ts), operator-reviewed. Verified against gov.uk IPTM3700, 2026-06-19.
NOT computed by ParaplanAI in v1 (deferred to v2 per ADR-022 / PL-45) — so the worked figure is illustrative (a transparent application of the s.528 proportion), clearly labelled, not an engine or HMRC pinned example.
Offshore-only: onshore (UK) life funds are taxed within the fund, so there is no time-apportionment reduction on an onshore bond gain.

For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.