Cap on Income Tax relief

Draft clauses recently published for the Finance Bill 2013 outline the way in which the Government proposes to limit the amount of tax relief an individual can claim. Capped reliefs will be limited to the greater of £50,000 or 25% of net taxable income – this is income less pension payments and charitable donations. The cap will commence 6 April 2013 and will include claims to carry back losses from 2013-14 to 2012-13.

Readers may remember that it was originally intended to include charitable donations in the capped reliefs but after successful lobbying by charities this proposal was dropped. We are pleased to report that two further reliefs will be excluded from the cap. These are:

1. Certain trade loss reliefs that are created by a claim for overlap relief – these losses generally occur when a self-employed trader changes their accounting year end date or ceases trading.
2. Losses incurred on shares that qualify as Enterprise Investment or Seed Enterprise Investment Schemes.


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