Top slicing relief allows for a chargeable event gain to be ‘top sliced’ to reflect the number of years the associated life policy gain has been earned over. Previously, the effect of a chargeable event gain could be to reduce the personal allowance where the total chargeable event gain causes an individual's adjusted net income to exceed £100,000.
For all relevant gains occurring on or after 11 March 2020, the personal allowance will be calculated with reference to the taxpayers other income and only the proportion of the gain after the top slicing relief calculation, when the gain is divided by the number of years for which the policy has been held.
This is expected to impact around 2,000 individuals who return these gains annually.