What is Top-Slicing?
Top-slicing relief was introduced by HMRC as a fair way of calculating a gain that had built up over a number of years without it having a huge impact on an individual’s rate of tax.
What is top-slicing?
Top slicing can be applied where the gain pushes a basic rate taxpayer into the higher rate bracket. If, after adding the slice to a client’s other taxable income, they remain within the basic rate tier, then the whole gain would be subject to income tax at 20% (for the 2016/2017 tax year).
If a client is already a higher rate taxpayer, then top slicing will have no effect as higher rate tax would be paid on the whole of the gain.
You can find an example of Top-Slicing Relief in our Taxation of Offshore Bonds Guide.