Tax Reliefs

Tax Reliefs

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Tax Reliefs

Under the UK S89 of ITA 2007 a person can claim a tax relief for the loss incurred in a new business, partnership or vocation against the income made in the last three previous years or incoming profit. A partnership is considered as a personal income effort tax purposes (James, 2015).

1. Tax relief from income calculation

David’s income for the last years before the loss, (from January 2015 to December 2015)

= 3750 × 12

= £ 45000 (the amount exceeds the total loss)

David will claim loss for 40000/45000 × 12 = 10.7 months

Tax relief = £616 (PAYE) × 10.7

= £ 6570

David can claim £ 6570 tax relief from the income tax but he will loss hos persona allowances.

1. Tax relief from business income

Tax bracket is between PA+£31,786 and £150,000 (which means tax rate is 40%)

Tax relief = £ 10000 (for been born after April 1948

Next year’s earnings (31st March 2016 to31st March 2017) = £ 62, 600

Number of months for £ 40,000 = (40000/ 52600 (62600 – 10000) × 12

= 9.13

Tax relief         = 9.15 × 52600 × 0.4 ÷ 12

= £1200

= £16043

1. Tax relief against the property business income

Property annual income = £ 45, 000

Tax rate = 40%

Relief = 40000 * 40/100

= £16000

The most beneficial tax relief would be tax relief from the business income. Claiming tax relief from the income will very