Cap on unlimited income tax reliefs

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Cap on unlimited income tax reliefs
  • Introduction
  • Reliefs included in the cap
  • Operation of the cap
  • Reliefs against total income which can be carried forward or back
  • How does the cap on income tax reliefs affect different types of taxpayers?


The cap on unlimited income tax reliefs applies from 6 April 2013. The cap only applies where the person claims more than £50,000 in reliefs in any one tax year. It acts to limit the relief for the tax year to the greater of:

  • £50,000
  • 25% of the ‘adjusted total income’ (see below)

ITA 2007, s 24A(1)–(5)

For a couple of basic examples of this, see the examples beneath paragraph 2.5 of the HMRC guidance  released following Royal Asset to FA 2013 (now archived).

This guidance note discusses the reliefs which are and are not subject to the cap as well as the operation of the cap. For more on the impact of the cap on claims over multiple tax years (including years before the cap was introduced), see the Cap on unlimited income tax reliefs ― claims over more than one tax year guidance note.

Reliefs included in the cap

In terms of the policy rationale as to which reliefs were to be included in the cap, the following general rules were applied:

  • it needed to be a relief against general income (ie a step 2 deduction for the purposes of ITA 2007, s 23, see the Proforma income tax calculation guidance note), and
  • the relief must not have been capped prior to the introduction of these rules

However interested parties successfully lobbied to ensure that the income tax relief available for losses on EIS / SEIS shares to be excluded from the cap. Similarly losses on qualifying investments in social enterprises are also excluded from the cap. These losses continue to be

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