Taxation of Chargeable Gains Act 1992 section 1J

Section 1I: definitions and other supplementary provision

Section 1J provides the key definitions and supplementary rules needed to apply Section 1I, which determines whether capital gains are taxed at the higher rate by reference to an individual's income tax position and unused basic rate band.

• A "higher income tax rate" includes the higher rate, default higher rate, savings higher rate and dividend upper rate; the "unused part of the basic rate band" is the amount by which the basic rate limit exceeds the individual's net income after allowances (Step 3 income)
• Step 3 income is reduced in certain circumstances — where the individual has a life insurance deficiency relief, or where inheritance tax adjustments reduce the residuary income of an estate that feeds into the individual's income
• Where an individual has life insurance gains, only the "annual equivalent" (the top-sliced amount) counts as Step 3 income for these purposes, and where top slicing relief applies and the calculation does not involve the higher rate, the individual is treated as having no income taxed at the higher rate, default higher rate or dividend upper rate
• For the purposes of Section 1I, the individual is always assumed not to be a Scottish or Welsh taxpayer, so the standard UK income tax rates and bands are used