Cap on unlimited tax reliefs

The Finance Act 2013 introduced a cap on certain otherwise unlimited tax reliefs, restricting the amount that can be claimed by an individual to 25% of income, or £50,000 if greater.

The cap only applies to those reliefs that are used to reduce the amount of general income liable to tax and that are not independently capped under other legislation. The major impact is on the set-off against general income of trading losses and qualifying loan interest (for example, on a loan taken out to invest in a partnership or close company).

HMRC has recently issued guidance on how the legislation works in practice. In general this simply confirms the previous understanding of the legislation, but it draws particular attention to the complexity that can arise in the case of ‘non-doms’; i.e. taxpayers who are resident but not domiciled in the UK.

For an updated version of our existing factsheet ‘Cap on unlimited tax reliefs’ click here and for a new factsheet ‘Cap on unlimited tax reliefs – remittance basis’ click here.


Gill Smith
Simon Baylis