I have a client who is in his eighties and normally has income levels below £20,000 pa. This year he has made a large chargeable gain (say £40,000 over 10 years) to which top slicing relief applies. But, hidden away in IR320 is... " top-slicing relief does not apply where you are claiming age related reliefs or allowances or tax credits." Can anyone interpret this?
Tony Ball
Anthony Ball
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This means that for age related allowance purposes, and tax credits, the WHOLE of the gain is taken into consideration (ie £40K in this case). This would almost certainly wipe out any age related allowances, potentially giving rise to an underpayment if any PAYE income is received and the coding has included age related allowances.
In the income tax computation, only the top sliced gain is counted (ie c.£4K in this instance), so it is unlikely that higher rate tax would be due.