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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4075
Experience:  FCCA FCMA CGMA ACIS
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I surrendered a Standard Life capital investment bond,

Customer Question

I surrendered a Standard Life capital investment bond, making a gain of about £32K over 5 years, with tax paid of £6500. I now need to submit an online self-assessment tax return to HMRC.
1. In which box(es) on the form do I insert the relevant information?
2. What is my likely tax liability?
Submitted: 11 months ago.
Category: Tax
Expert:  bigduckontax replied 11 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

You only have to pay tax on the chargeable gain if you are a higher or additional rate taxpayer. If you are then please follow up on this thread.

I do hope that you have found my reply of assistance.

Customer: replied 11 months ago.
the £35K has pushed me into the 40% tax band for that financial year. That is the point of my question.
Expert:  bigduckontax replied 11 months ago.

Top slicing relief applies. 32K / 5 = 6.4K which is the slice added to your income in the year of surrender. Does this still push you into the higher rate band? If so you will be liable for another 10% (16/17 rates), otherwise 18%.

As this is income you include it in boxes 11, 19 and 21.

Customer: replied 11 months ago.
Sorry for the delay in responding - life intervened.
My query relates to the 2014/15 tax year and the corresponding online self-assessment form (which has no boxes 19 and 21). At the moment the entries on the form are as follows:
Page 3, box 1 (Taxed UK interest) - £176
Page 3, box 10 (Pensions etc.) - £38593
Page 3, box 11 (Tax taken off box 10) - £5789
Page 4, box 5 (Gift Aid payments) - £492
Page 4, box 6 (One-off payments in box 5) - £312
The chargeable event certificate from Standard Life indicated that on maturity of the capital investment bond after 5 years, the gain was £32,852. At the moment I am considering inserting that information as follows:
Page 5, box 4 (UK life insurance policy etc. gains on which tax was treated as paid) - £32,852
Page 5, box 5 (No. of years the policy has been held or since the last gain) - 5
So my 2 questions remain:
1. Which are the correct boxes to insert the information relating to the chargeable gain in 2014/15?
2. Assuming that the chargeable gain pushes me into the 40% tax bracket, what is my tax liability for that year?
Expert:  bigduckontax replied 11 months ago.

You do not actually have a gain as top slicing relief transfers one fifth of it to income. So you add the 6.4K to Box 10 making it 44993 and adjust the tax paid [box 11] element of 6.5K.

Your tax position for 14/15 is 44857 less personal allowance of 10000 leaves 34857 exposed to tax of which 31865 will be taxed at 20% [6373] and the balance, 2992 at 40% [1197] Deduct tax paid 12318 means that when the chips are down HMRC owes you a substantial sum of money.

Customer: replied 11 months ago.
I did not understand the first two sentences of your last answer. The charge certificate from Standard Life clearly states that I made a gain of £32K. So entering that amount on the online self-assessment tax return form is nothing to do with boxes 10 and 11, which relate to my pension income.
I accept what you say about top-slice relief, and that your calculation of my tax liability is broadly correct.
Because I was confused, I phoned the HMRC helpline and an adviser there told me which boxes on the form the £32K and the 5 years should be entered. I had not contacted them first because I had heard it was very difficult to get through to them.
I realise that it is difficult for someone in your position to advise when you do not have all the paperwork in front of you. But in future I shall try the HMRC helpline first.
Expert:  bigduckontax replied 11 months ago.

Did HMRC explain top slicing relief to you? If they did not then there is a very good chance of your receiving a huge tax bill for the 32K declared instead of the lower amount on your account. HMRC have a very well deserved reputation for not being able to get hold of the stick if they can even find the stick at all and this may well have occurred in this instance.

Customer: replied 11 months ago.
the HMRC adviser did tell me I was entitled to top-slice relief. So I am not expecting a shock when the tax demand arrives.
Expert:  bigduckontax replied 11 months ago.

Well I trust that you will not, but don't hold your breath would be my advice.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 11 months ago.

Thank you for your support. I do hope that all goes well with you and you get your top slicing relief easily.