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 individuals rate of tax.
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What is top-slicing?
Top slicing relief allows individuals to potentially mitigate paying higher rate or additional rate Income Tax, on some or even all of the chargeable gain.
Top slicing relief is available for UK resident individuals who do not pay higher or additional rate Income Tax on other income (excluding the gain) however, when the gain is added to income, the individual becomes subject to higher or the additional rate of Income Tax.
If a client is already a higher rate taxpayer (and the gain does not take them into the additional rate), then top slicing will have no effect as higher rate tax would be paid on the whole of the gain.
When top slicing relief does not apply
Top slicing relief does not apply to personal representatives, corporate's or trustees. If the plan is held in trust, and the chargeable gain falls on the settlor, the can claim top slicing relief.
You can find further information on Top-Slicing Relief in our Time Apportionment Relief and Top Slicing Relief.