Insurance bond gains and capital gains in the same tax year: Q&A

Last Updated: 6 Apr 24 2 min read

How do chargeable event gains on a bond interact with capital gains in the same tax year?

Capital Gains and Chargeable Event Gains in same tax year

Q. What happens when you have a capital gain and a chargeable event bond gain in the same tax year?

A. As chargeable event gains on bonds are categorised as 'savings' in the tax calculations, they come before capital gains in the calculation. Therefore, the capital gain is ignored when calculating the tax due on the bond.

Impact on Capital Gain

Q. Would higher rate tax apply to the capital gain then?

A. Yes, perhaps. When calculating the CGT liability, the top sliced Chargeable Event Gain is added on top of the income. If the client's income plus the top sliced gain takes the client into the higher rate band, then the full capital gain (less allowable deductions) will be taxed at the appropriate higher CGT rate. (depending on the asset).

Q. What if the top sliced chargeable event gain keeps the client in the same basic tax band, would all the capital gain be taxed at a lower CGT rate?

A. Only if it all falls into the basic rate band. If the client is still a basic rate taxpayer after top slicing is applied, then the amount of Capital Gain within the basic rate band will be taxed at the appropriate lower CGT rate (depending on the asset), the balance of the Capital Gain will be taxed at the appropriate higher CGT rate (depending on the asset).

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