Investment bonds and top-slicing relief

A chargeable gain on an investment bond is added to income for the year it's realised — but taxing the whole gain in one year could push a client through rate bands they'd never have reached had the gain been spread across the years they actually held the bond. Top-slicing relief corrects for that: divide the gain by the number of complete years held to get one 'slice', work out the tax on that one slice (recalculating the personal savings allowance and personal allowance using the slice, not the full gain), multiply by the number of years, and that's the relieved liability. Onshore bonds get a further, separate benefit: a non-refundable tax credit equal to 20% of the gain, reflecting tax already paid inside the insurer's fund — it reduces the bill but never turns into a repayment if it exceeds what's due. Offshore bonds get no such credit; the full relieved liability is payable.