Ask the Expert: My accountant says I should top-slice my investment bond. What does that mean?

Carl Lamb, managing director of Almary Green, offers his advice. Picture: Almary Green.

Carl Lamb, managing director of Almary Green, offers his advice. Picture: Almary Green.

Almary Green

I have an investment bond which should pay out next year and the amount it will bring in will take me from my current basic rate tax band into a higher rate tax band.

My accountant tells me I can apply something called top-slicing to the gain which will stop that happening.

Can you explain how this works please and whether or not it is a good idea?

Response from Carl Lamb of Almary Green

Top-slicing is a term that is used to describe a relief system that allows you to spread the value of a gain on an investment bond or on the disposal of a life insurance policy over the number of years that you have held it in cases where the gain takes you into a higher tax bracket – so the gain doesn’t hit your assessed income for tax all in one go.

It is applied to gains that are “chargeable events” – which are triggered when your gain must be assessed for tax purposes.

It is indeed a useful tool to mitigate a potentially large tax bill if you receive gains within a specific tax year that tip you into the next tax bracket.

It is a fairly complex piece of tax planning so I do recommend that you get help either from your accountant or your financial adviser to make sure that you set it up properly.

If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box above for details.

Become a supporter

This newspaper has been a central part of community life for many years. Our industry faces testing times, which is why we're asking for your support. Every contribution will help us continue to produce local journalism that makes a measurable difference to our community.

Latest from the Eastern Daily Press

Share this article on LinkedIn