Income Tax Act 2007 section 24A

Limit on Step 2 deductions

Section 24A caps the amount of certain income tax reliefs that an individual can deduct against their total income in any tax year, ensuring that the total of specified relief deductions cannot exceed the greater of £50,000 or 25% of the taxpayer's adjusted total income.

• The cap applies to a defined list of sideways loss reliefs and other deductions, including trade loss relief, property loss relief, employment loss relief, share loss relief, qualifying loan interest, and losses on certain securities.
• Certain deductions are excluded from the cap, notably losses attributable to business premises renovation allowances, losses set against profits of the same trade or business, overlap relief, and share losses on EIS, SEIS or social investment shares.
• The cap is calculated by comparing the total of the relevant deductions (Amount A) with the higher of £50,000 or 25% of adjusted total income (Amount B); Amount A must not exceed Amount B.
• Adjusted total income is the taxpayer's total income, with payroll giving deductions added back and gross pension contributions (where relief at source or excess net pay relief applies) subtracted.