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Where Taxpayers and Advisers Meet

Top slicing relief - help

Incredulum
Posts:2795
Joined:Thu Dec 03, 2009 5:35 pm
Top slicing relief - help

Postby Incredulum » Tue Mar 30, 2021 9:59 pm

In 2020/21 an individual has salary of £102,200, and has made, to date, gift aid donations of £2,200. No other income.

The individual has profits on two onshore bonds amounting to 18k (15 years, making £1,200 averaged over its life), and 11k (18 years making £611 averaged over its life). Can the individual keep their personal allowance by making a personal pension contribution? And if so, how much does it need to be? Or (as pension contributions are restricted to 10k) a further Gift Aid donation?

Thank you.

ben_power
Posts:81
Joined:Tue Feb 27, 2018 8:34 pm

Re: Top slicing relief - help

Postby ben_power » Wed Mar 31, 2021 5:17 pm

Pension contributions would be possible based on their employed income alone up to £40,000 providing the MPAA has not been triggered which I suspect your £10,000 is referring to. If the MPAA applies then this is actually £4,000, not £10,000 as it reduced last year.

Tax would still be due on the bond surrender regardless.

If it's viable, assigning into joint names before surrendering can potentially help reduce the tax as well as full assignment between spouses (if applicable), ideally to a non/basic rate taxpayer.

Currently they'll be liable to the additional 20% which should be avoided if at all possible.


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