Cap on unlimited income tax reliefs ― claims over more than one tax year

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 ― claims over more than one tax year
Introduction
Reliefs against total income which can be carried forward or back
Transitional provisions
How does the cap on income tax reliefs affect different types of taxpayers?

Introduction

The cap on unlimited income tax reliefs applies from 6 April 2013 (although transitional rules apply in relation to prior tax years, see below). 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’ (for the definition of this term, see the Cap on unlimited income tax reliefs guidance note)

ITA 2007, s 24A(1)–(5)

This guidance note discusses the impact of the cap on claims over multiple tax years (including years before the cap was introduced). For details of the operation of the cap and the reliefs which are and are not subject to the cap, see the Cap on unlimited income tax reliefs guidance note. It is recommended to read that guidance note first before continuing.

Reliefs against total income which can be carried forward or back

A number of the loss relief provisions included in the cap allow claims for relief to be made in a tax year which is not the same as the year in which the loss arose. The following provisions allow this method of relief: