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Life assurance & tax

Top-slicing relief attempts to put you in the position you would have been in, had the lump sum been paid in equal amounts in each year of the bond’s life. It doesn’t exactly achieve that, but it’s a good approximation.

The problem is, HMRC’s computer hasn’t calculated the top-slicing relief correctly in every case. For example, where the taxable part of the bond pushed your income for the year over £100,000, part or all of your personal allowance is withdrawn. However, in the top slicing relief calculation your Personal Allowance should have been reinstated. It is this step the HMRC computer missed.

A recent tax tribunal case has determined that HMRC was wrong. If you received taxable income from a life assurance bond in the last eight years, or you were an executor of an estate that received income from an offshore bond, ask us to double check the tax due.

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Clarke Nicklin Financial Planning is a trading name of CNFP LLP, registered in England, company number OC324909. Registered Office: Clarke Nicklin House, Brooks Drive, Cheadle Royal Business Park, Cheadle, Stockport, SK8 3TD. Email: enquiries@cnfp.co.uk. CNFP LLP is authorised and regulated by the Financial Conduct Authority.

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