Free UK bond tax calculator

Investment bond encashment tax calculator 2026/27

Cashing in an onshore or offshore investment bond triggers a chargeable event — a slice of tax the wrapper has deferred over the years. This calculator walks through the 5% tax-deferred withdrawal allowance, works out the chargeable gain, applies HMRC's top-slicing relief and compares different ways of taking the money so you can see which is most tax-efficient.

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Bond encashment tax calculator

Work out the income tax on cashing in an onshore or offshore investment bond — including the 5% rule, top-slicing relief and smarter ways to take the money. Tax year 2026/27.

Who owns the bond?

Bond gains are charged to income tax on the owner — so ownership decides whose income, allowances and tax bands we use.

Assumptions & limitations

2026/27 rates and bands for England, Wales & NI: personal allowance £12,570 (tapered above £100,000), basic-rate band £37,700, additional-rate threshold £125,140, savings rates 20/40/45, dividend rates 10.75/35.75/39.35, starting rate for savings £5,000, PSA £1,000/£500/£0, dividend allowance £500. Scottish taxpayers: bond gains are savings income and use UK rates, but tax on earned income will differ slightly from this model.
Phasing calculations use 2027/28 savings rates of 22/42/47 and assume the onshore 20% credit is unchanged (expected but not yet confirmed) and that income and bands are otherwise the same next year.
Top-slicing follows HMRC's five-step method with the personal allowance — and here also the PSA — recalculated using the sliced gain (FA 2020 / Silver). Where an insurer or HMRC calculates the PSA differently in the relieved step, results may vary slightly.
The personal allowance is set against income in the statutory order (bond gains before dividends); past withdrawals are assumed to have been taken evenly across segments and within the 5% allowances except where prior gains are declared; excess events are treated as arising at the end of the current policy year.
Not modelled: time-apportionment relief for periods of non-UK residence, deficiency relief, the High Income Child Benefit Charge, gift aid, restricted relief qualifying policies, and the trustees' £500 de-minimis band.
This tool is for education and guidance only. It is not financial, tax or legal advice, and no action should be taken on the basis of it alone. Due North Money is not responsible for decisions made using this calculator — please take regulated financial advice.

Who this calculator is for

People holding an onshore or offshore investment bond who are thinking about surrendering all of it, cashing in whole segments, or making a partial withdrawal — and want to see the tax bill before pulling the trigger. Also useful for anyone comparing strategies with an adviser.

The 2026/27 rules it uses

Onshore bonds: gains taxed as savings income; a 20% notional basic-rate credit is treated as already paid.
Offshore bonds: full gain taxable as savings income at your marginal rate — no basic-rate credit.
5% rule: you can withdraw up to 5% of the original premium each year (cumulative) with no immediate tax charge.
Top-slicing relief: the gain is divided by the number of full policy years to work out an "annual equivalent" for calculating relief.
2026/27 income tax bands, personal allowance and personal savings allowance apply.

Frequently asked questions

What is top-slicing relief?

A tax relief designed to stop a one-off bond gain pushing you into a higher tax band unfairly. It works out the average annual gain across the policy years, calculates tax as if that slice were the only gain, then scales the result back up.

What's the difference between onshore and offshore bonds?

Onshore bonds pay tax within the wrapper, so gains carry a notional 20% basic-rate credit. Offshore bonds pay little or no tax within the wrapper, so the whole gain is taxable on encashment. The calculator handles both.