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HMRC internal manual

Insurance Policyholder Taxation Manual

Top slicing relief: general

The approach of the chargeable event regime, which is to charge on a realisations rather than accruals basis, may benefit some individuals. This could, for example, be so if the charge on gains is deferred until after retirement when income is likely to be lower than previously. But many individual taxpayers will suffer disadvantage by being charged in a single year on gains that have accrued over a period. Top slicing relief may assist. Its effect is to reduce in some circumstances the rate of tax charged on the gain by applying a spreading mechanism.

The relief cannot assist taxpayers already liable to tax at the higher rate before the chargeable event gain is added to their income.

There is no top slicing in computing income for the purposes of calculating entitlement to age-related allowances, or child or working tax credits. The full amount of the gain is included for these purposes.

Special rules apply to ‘foreign policies’.

The relief is only available to individuals.

Further reference and feedback IPTM1013