The State of Paraplanning Tax Calculations

The headline finding

HMRC's Insurance Policyholder Taxation Manual (IPTM3820) states that, for gains arising in 2021/22 onwards, two allowances inside the top-slicing relief computation — the Personal Savings Allowance and the starting rate for savings — are recalculated at the notional income level used inside the relief, not carried through from the taxpayer's actual-income position. The five steps of the relief did not change; one input running through two of them did.

ParaplanAI's analysis of HMRC's own worked methodology puts a number on it. On a single, unremarkable offshore bond — a £90,000 gain before any TAR built over six complete years, set against £45,000 of other income — the correct post-2021 method gives £7,417 of relief. The pre-2021 method, which carries the Step-1 Personal Savings Allowance of nil into Step 4 rather than recomputing it to £500, gives £6,817. Same bond, same gain, same income: a £600 difference that turns entirely on which allowance figure is used at one step. This is one of the engine's load-bearing regression cases: we derived it by following HMRC's method, and it is pinned at zero-pence tolerance on every change.

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.

£600 on a small case. Longer policy terms can move more. And because the error produces a plausible, positive, right-order-of-magnitude number, it does not trip a sense-check — which is why it is easy to miss.

Three error patterns we document

Three structural mistakes are easy to make in these calculations. None is exotic; each understates or overstates a client's tax in a way a sense-check may not catch.

1. Carrying the full-gain allowance into Step 4. For a gain arising in 2021/22 or later, reusing the Step-1 Personal Savings Allowance at Step 4 (the pre-2021 method) can understate relief where the full gain crosses a rate boundary that the annual-equivalent slice does not.

2. The missing CPI step in defined-benefit inputs. A defined-benefit pension input amount is the increase in the capitalised value of benefits — but the opening value must first be uprated by September CPI (Finance Act 2004, s.235) before it is subtracted. Skip that step and the input amount, the annual-allowance excess and the charge are all overstated — manufacturing a charge that is not due. In a high-inflation year (CPI was 10.1% for 2023/24) the gap is thousands of pounds on a single member.

3. The money-purchase-allowance folklore. “The MPAA wipes carry forward” is a common misreading, and PTM055100 says the opposite. Carry-forward survives an MPAA trigger; it simply can never be set against the £10,000 money-purchase cap, while remaining available for the alternative annual allowance. Letting carry-forward absorb a money-purchase excess over the £10,000 cap understates the charge — the worst direction for compliance.

Each of these is unpacked, with the worked arithmetic and the governing HMRC reference, in our technical library.

The 2026 Paraplanner Tax-Calculation Survey

The analysis above is about the rules. The other half of this report is about the profession: how paraplanners and advisers actually run these calculations, what they use, and how confident they are in the figures they sign off. To measure that, we are running the Paraplanner Tax-Calculation Confidence Survey — a short, anonymous study of UK paraplanners and advisers.

It asks what tools the profession relies on for top-slicing, annual-allowance and defined-benefit calculations; how confident respondents are in those outputs; whether they were aware of the 2021 top-slicing change; and how a wrong figure would be caught. The findings will be published here, in aggregate and anonymised, as the quantitative half of this report — and shared with any trade title that wants to cover them.

Methodology & data note

We hold a deliberately high bar on what we will and won't claim. The calculation findings in this report are grounded in primary sources: HMRC manuals and legislation, HMRC's own published worked examples, and cases we derive from them, reproduced by ParaplanAI's deterministic calculation engine. Every figure — the £7,417, the £600, the CPI gap — traces to a specific HMRC reference or the engine's test corpus. None is an estimate.

The practitioner findings — how the profession works and how confident it is — come from the survey above, and are not yet published; this edition asserts no statistics about practitioner behaviour until that data is collected. ParaplanAI is a new tool, and we will not substitute invented numbers for a real sample. When the survey closes, the aggregate, anonymised results will be added here and dated.

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