Taxpayers seeking to obtain in excess of £50,000 of otherwise unlimited income tax reliefs in any one year are restricted in their claim to the higher of:
- 25% of their total income, or
One of the tax reliefs is property tax loss relief, which is available for offset against total income – most commonly where some or all of the loss is attributable to capital allowances.
The ‘capped’ loss will not be wasted as it can be relieved by offset against the owner’s other (‘general’) income in the next tax year, with any ‘uncapped’ amount being carried forward and set against future profits of the same UK property business.
Mark has estimated total income for 2016/17 of £300,000. He makes pension contributions of £30,000 gross, is estimated to pay £50,000 in (non-property related) loan interest and will have a property loss eligible for sideways relief of £30,000.
The amount of ‘uncapped reliefs’ equals £80,000, exceeding the ‘cap’ ‘de minimis’ of £50,000. The total ‘uncapped’ relief thus available for offset is calculated as (£300,000 – £30,000 pension) x 25% = £67,500.
It would be preferable for the loan interest to be claimed in full with £17,500 of property loss, the remainder being carried forward and available for offset against the 2017/18 total income.
This is a sample tip taken from our 165 page guide: