Investment bonds and top-slicing relief

Fix the category first: a chargeable event gain on an investment bond is INCOME — savings income, added to the client's other income in the year of encashment — never a capital gain, so no annual exempt amount and no CGT rates, however gain-like it looks. That single classification decides half the questions on this node. The problem top-slicing relief solves follows directly: a gain that built up over many years lands in one tax year and can shove the client through bands they never crossed while it accrued. The method, in order and by name: (1) divide the gain by the number of COMPLETE years held to get one slice; (2) tax that single slice on top of the client's other income — recalculating the personal savings allowance and personal allowance for THIS calculation using other income plus the slice, not the full gain (the post-2020 method the exam now expects); (3) multiply the one-slice tax by the number of years — that is the relieved liability. Watch the language: top-slicing changes the RATE the gain suffers; it never reduces the gain itself, and 'complete years' means complete policy years, not calendar years or a rounded guess. Then, separately, onshore bonds carry a basic-rate TAX CREDIT of 20% of the gain — 'tax treated as paid' inside the UK life fund. Precision matters here twice over: it is a credit against the liability, not a deduction from the gain; and it is non-repayable — it can take the bill to zero, never below, and never generates a refund. Offshore bonds have no such credit, because no UK fund tax was suffered; their gains also get the starting rate for savings and PSA in full, but the whole relieved liability is actually payable.