Cap on Unlimited Reliefs Print

There is a cap on the amount of income tax reliefs claimable by individuals. The cap is 25% of adjusted total income, or £50,000, whichever is the greater.

Adjusted total income is arrived at by deducting from the total income for the year the gross amount of any pension contributions, and adding back any deductions for payroll giving.

The cap applies to those reliefs which were previously unlimited, and which may be relieved against general income. The following reliefs are capped:

  • Trade loss relief against general income;
  • Loss relief in the first 4 years of trading;
  • Post-cessation trade relief;
  • Share loss relief (losses arising on the disposal of certain qualifying shares which may be set against general income).
  • Qualifying loan interest used to acquire an interest in a partnership, or company, and loans taken out by personal representatives to pay inheritance tax.
  • Property losses arising from capital allowances or agricultural expenses, and post-cessation property relief;
  • Employment loss relief;
  • Former employees’ deduction for liabilities;
  • Losses on deeply discounted securities held since at least 26 March 2003;

The following reliefs are not capped:

  • Trading losses brought forward from a prior year which can only be set against future trading profits of the same trade;
  • Property income losses which can only be set against future property income;
  • Business premises renovation allowances;
  • Losses attributable to overlap relief;
  • Losses on disposals of shares where either Enterprise Investment Scheme relief or Seed Enterprise Investment Scheme income tax relief is due;
  • Capital allowances – to the extent that they do not create or enhance a loss that may be set against general income;
  • Items with tax exempt status for example redundancy payments;
  • Allowable business expenses;
  • Structural credits such as foreign tax credit or dividend tax credit;
  • Gift Aid and other charitable donations

Reliefs subject to existing limits:

Seed EIS
Venture Capital Trusts
Pension savings

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