19 July 2012
As announced in the 2012 Budget, the government intends to introduce a cap on otherwise ‘uncapped’ tax reliefs from 6 April 2013, limiting the amount that can be claimed by an individual to 25 per cent of income, or £50,000 if greater. The details of this proposal have now been outlined in the government’s consultation document published on 13 July.
The cap on reliefs will only apply to those reliefs that are used to reduce the amount of general income liable to tax and are not currently capped. The intention is that reliefs currently subject to their own cap, like those for pension contributions or for investment under the Enterprise Investment Scheme, will be unaffected.
When the proposal to limit tax reliefs was announced in the Budget, it was intended that the cap would also apply to reliefs given for charitable donations. However, following considerable opposition from charities and having received extensive media attention over the issue, the government announced prior to the publication of the consultation document that reliefs on gifts to charities would not be affected by the income tax relief cap.