Relief for income tax losses
Relief for income tax losses

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Relief for income tax losses
  • Cap on unlimited income tax relief
  • Trade losses
  • Partnership losses
  • Property losses
  • Employment losses
  • Share loss relief on disposal of shares

Reliefs entitle taxpayers to reduce the amount of income tax payable. When calculating liability to income tax, a taxpayer may deduct reliefs from total income resulting in a net income figure. In order to utilise the reliefs and allowances to their optimum, loss relief should be set off before the deduction of allowances such as the personal allowance and the blind person’s allowance.

While this Practice Note sets out the main types of reliefs for losses currently available under the income tax rules, it does not cover corporation tax.

Main types of loss reliefs

In computing the income chargeable to income tax, provision is made for the deduction of loss relief, subject to various conditions, as follows:

  1. losses in a trade, profession or vocation, including trades etc carried on abroad, as set out in Chapter 2 of the Income Tax Act 2007 (ITA 2007) and trade loss relief for partnerships as set out in ITA 2007, Ch 3

  2. property business losses as set out in ITA 2007, Ch 4

  3. employment losses as set out in ITA 2007, Ch 5

  4. losses on the disposal of certain shares as set out in ITA 2007, Ch 6

  5. losses from miscellaneous transactions as set out in ITA 2007, Ch 7

Cap on unlimited income tax relief

From 6 April 2013, the amount of certain types of