When an individual has a chargeable event gain in a year, Top Slicing Relief (TSR) is applied to the gain. TSR requires two calculations:
Example 1:
Employment Income EMP1 £30,000, (tax EMP2 £3,700)
Chargeable Event Gain AOI4 £70,000 (AOI5 = 5) = Total Income £100,000 (Personal allowance £11,500).
For 2017/18 the SA tax calculator includes the tax figure with no Nil Rate £500 in the basic rate band, giving a total of £15,000 in the basic rate band. The £500 nil rate band should be applied. The Top Slicing Relief is calculated as £11,000 whereas it should be £11,400.
The calculation, taking into account the starting rate for savings and personal savings allowance is illustrated below:
| Current without TSR | |||||||
| Non Savings | Event Gain | Total | Tax | Tax on Gain | |||
| Income | 30,000.00 | 70,000.00 | 100,000.00 | ||||
| PA | - 11,850.00 | - 11,850.00 | |||||
| 18,150.00 | 70,000.00 | 88,150.00 | |||||
| 0% | 500.00 | 500.00 | - | ||||
| 20% | 18,150.00 | 14,500.00 | 32,650.00 | 6,530.00 | 2,900.00 | ||
| 40% | 55,000.00 | 55,000.00 | 22,000.00 | 22,000.00 | |||
| 88,150.00 | 28,530.00 | 24,900.00 |
| TSR Correct Calculation | |||||||
| Non Savings | Event Gain Annualised | Total | Tax | ||||
| Income | 30,000.00 | 14,000.00 | 44,000.00 | ||||
| PA | - 11,850.00 | - 11,850.00 | |||||
| 18,150.00 | 14,000.00 | 32,150.00 | |||||
| 0% | 500.00 | 500.00 | - | ||||
| 20% | 18,150.00 | 13,500.00 | 31,650.00 | 6,330.00 | 2,700.00 | ||
| x5 Years | 13,500.00 | ||||||
| Correct TSR | 11,400.00 |
HMRC's calculation ignores the nil rate for savings and calculates TSR simply as being the difference between (14,500*20%+55,000*40%) = 24,900 and (14,000*20%*5 years) = 14,000 = £10,900 TSR.
For 2017/18 returns, If you believe that your Top Slicing Relief calculation is incorrect, a paper return should be filed together with an explanation as to how the calculation is affected.
For 2018/19 HMRC believe this exclusion no longer applies and so we have removed the Check and Finish message from our software.