What does section 525 of the Income Tax (Trading and Other Income) Act 2005 do?

Section 525 provides that where the annual calculation under section 522 shows a gain has arisen on a personal portfolio bond during an insurance year, a chargeable event is deemed to occur at the end of that insurance year. This fixes the precise timing of the resulting income tax charge for the policyholder.

When is a gain on a personal portfolio bond treated as arising under section 525?

Under section 525, any gain identified by the annual calculation is treated as arising at the end of the relevant insurance year. A chargeable event is deemed to occur at that point, meaning the gain crystallises at the close of the insurance year and must be included in the policyholder's income tax computation for the corresponding tax year.

How does section 525 interact with the section 522 annual calculation?

Section 522 requires an annual calculation to determine whether a gain has arisen on a personal portfolio bond during each insurance year. If that calculation reveals a gain, section 525 applies to treat a chargeable event as occurring at the insurance year end, thereby triggering the tax charge on the identified gain.

Can you give an example of how section 525 applies in practice?

If a personal portfolio bond's insurance year ends on 30 June 2024 and the section 522 calculation shows a £5,000 gain, section 525 deems a chargeable event to occur on 30 June 2024. The £5,000 gain is treated as arising on that date and forms part of the policyholder's taxable income for the 2024–25 tax year.

Income Tax (Trading and Other Income) Act 2005 section 525

Chargeable events where annual calculations show gains

Section 525 explains what happens when the annual calculation performed under section 522 reveals that a gain has arisen on a personal portfolio bond during an insurance year.

This section applies where the annual calculation under section 522 shows a gain has arisen in a particular insurance year.
Any such gain is treated as arising at the end of the relevant insurance year.
The gain is deemed to occur because of a chargeable event taking place at that point in time.
The effect is to create a specific taxable moment linked to the close of each insurance year in which a gain is identified.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member