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HMRC has confirmed that, when calculating top slicing relief, personal allowances must be set, as far as possible, against other income in preference to the life insurance policy gain. This is to ensure that the allowance cannot be used twice in the tax year.
The department adds that, of the 45,000 customers who incur such gains, it believes about 2,000 will benefit from the FA 2020, s 37 change.
It has completed the 2018-19 auto recovery rework and is now carrying out a manual review of 2018-2019 returns.
For 2019-20 returns, HMRC has added an exclusion to the e-filing exclusion list; taxpayers will have to complete paper returns to obtain the correct calculation.
From 2020-21, the changes will be incorporated in the self-assessment calculator, so the correct amount of relief will be calculated as part of the online tax return.
This update, which was provided to the Chartered Institute of Taxation, will be included in the next agent update.
