CAP ON UNLIMITED INCOME TAX RELIEFS
Do you have trading losses in the current year from your business (Sole Trade or Partnership)? Do you have losses arising in your property business as a result of claiming Capital Allowances? Have you paid interest on monies borrowed for a qualifying purpose, such as investing in a business, or acquiring business assets? From 2013/14 the amount a taxpayer can set off against their total income to claim income tax relief is limited at the greater of :- 25% of their total income after deductions of any grossed up pension contributions (if paid net by an individual) , or £50,000. This cap does not apply to trading losses carried forward for relief against future profits of the same trade, but will apply in the following circumstances:- • A claim for relief is made to set off trading losses against total income in the same or previous year. • A claim for relief is made to carry back the losses in the early years of trading. • A claim for relief is made to set off against total income of the same year or the following year. Capital Allowances arising in a Property Letting Business • A claim for relief is made against total income for a Loss arising from the sale of unquoted company shares. • A claim for relief is made against total income in the same year for eligible interest paid. The amount unrelieved due to the cap can be relieved in another tax year except for unrelieved interest, which can never be carried forward or back. There are numerous conditions and variation to the rules and it is worth speaking to us to determine how best to manage future claims as well as the timing of pension contributions to ensure the maximum permissible relief is claimed.