What you need to know about top-slicing relief

The general understanding of how top-slicing relief works has changed in recent times - but the legislation has not.

June 2020

Barry Foster

Vice President, Strategic & Technical Sales

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30 MINS STRUCTURED CPD

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Risk Disclaimer

This content is directed only to persons having professional experience in matters relating to personal investment (investment professionals) and should not be distributed to anybody else. It has been prepared for general information purposes only. It does not constitute advice (whether investment, legal, regulatory, tax or otherwise) provided by BMO Global Asset Management (EMEA) (BMO). Certain content in this document is based on our own reading of legislation, regulation, or guidance issued by a government or regulatory authority, as at the date of publication, which is subject to ongoing change. Tax treatment is based upon individual circumstances. BMO gives no warranty or representation, whether express or implied, that such content is up to date, complete, or accurate.

Investment professionals in receipt of this document should not rely on any of its content. They remain solely responsible for advising their underlying clients in accordance with their own legal and/or regulatory obligations and for taking their own independent advice as they determine is necessary.

To the extent lawful, BMO excludes all responsibility and associated liability for any loss or damage suffered by any recipient of this document who chooses to rely on its content, whether occurring in contract, tort (including negligence), breach of statutory duty, or otherwise, even if foreseeable.

Key takeaways:

  • An understanding of how the top-slicing relief calculation works
  • Relationship between top-slicing relief and the Personal Savings Allowance
  • Why the First Tier Tax Tribunal decision in Silver v HMRC is significant

The general understanding of how top-slicing relief works has changed in recent times – but the legislation has not.

Top slicing relief is a very valuable feature of investment bond taxation. It turns out, however, that for many years we may not have fully understood how it works.

Historically most of us had the following understanding of top slicing relief:

  • Where an investment bond chargeable event gain (when added to other income) sits entirely within a tax band (basic rate, higher rate or additional rate) top slicing relief is not available.
  • Top slicing relief is available only where the gain straddles tax bands (for example, where a client’s ‘other’ income sits within the basic rate band, but the chargeable event gain sits part in basic rate and part in higher rate).
  • Top slicing relief is therefore a relief against higher or additional rate tax.

 

So how does top-slicing actually work? Download our explanation and case studies.

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Risk Disclaimer

This content is directed only to persons having professional experience in matters relating to personal investment (investment professionals) and should not be distributed to anybody else. It has been prepared for general information purposes only. It does not constitute advice (whether investment, legal, regulatory, tax or otherwise) provided by BMO Global Asset Management (EMEA) (BMO). Certain content in this document is based on our own reading of legislation, regulation, or guidance issued by a government or regulatory authority, as at the date of publication, which is subject to ongoing change. Tax treatment is based upon individual circumstances. BMO gives no warranty or representation, whether express or implied, that such content is up to date, complete, or accurate.

Investment professionals in receipt of this document should not rely on any of its content. They remain solely responsible for advising their underlying clients in accordance with their own legal and/or regulatory obligations and for taking their own independent advice as they determine is necessary.

To the extent lawful, BMO excludes all responsibility and associated liability for any loss or damage suffered by any recipient of this document who chooses to rely on its content, whether occurring in contract, tort (including negligence), breach of statutory duty, or otherwise, even if foreseeable.