Income Tax Act 2007 section 27

Order of deducting tax reductions: individuals

Section 27 sets out the rules governing the order in which individual taxpayers must apply their tax reductions when calculating income tax liability at Step 6 of the section 23 calculation.

• Tax reductions should generally be deducted in whichever order produces the greatest overall reduction in the taxpayer's income tax liability for the year
• Where a taxpayer is entitled to more than one of certain specified reliefs (including VCT, EIS, SEIS, social investment, community investment, life annuity interest, maintenance payments, and married couple/civil partner reliefs), these must be deducted in a prescribed order set out in the legislation
• Double taxation relief — whether under a treaty arrangement or as unilateral relief for foreign tax — must always be deducted last, after all other tax reductions have been applied
• Any tax reduction not specifically listed in the prescribed order may be applied at whatever point — before or after the listed reliefs — gives the taxpayer the maximum reduction in liability