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View the related Tax Guidance about Adjusted net income

Tax relief for pension contributions

Tax relief for pension contributionsThe completion of boxes 1 to 4 at the top of page TR4 of the main tax return allows a taxpayer to claim tax relief on pension contributions made in the tax year.Most contributions to registered pension schemes are paid net of basic rate tax relief (via a relief at source scheme), so the only additional relief sought by entry on the tax return is relief at higher rates of tax.For Scottish taxpayers, relief at source is at the Scottish basic rate. From 2017/18 onwards, due to the divergence in the Scottish bands and rates from the rest of the UK, multiple bands need to be extended where pension contributions are paid to relief at source schemes. Scottish tax bands need to be extended for calculating tax on non-savings, non-dividend income. UK tax bands need to be extended for calculating tax on savings and dividend income of Scottish taxpayers. This is discussed further below.Contributions are paid gross to occupational schemes that use a net pay arrangement.For the meaning of a registered pension scheme, relief at source scheme and net pay arrangement, see the Pensions glossary of terms guidance note.The tax relief available for pension contributions is summarised in the Flowchart ― tax relief for contributions to a UK registered pension scheme.Conditions for tax relief to be claimedRelevant UK individualTo obtain tax relief on pension contributions, the scheme member must be a relevant UK individual. This means that the individual must:•have relevant UK earnings chargeable

Abolition of the remittance basis from 2025/26

Abolition of the remittance basis from 2025/26Prior to 6 April 2025, UK resident individuals who were not domiciled or deemed domiciled in the UK had the choice to pay tax on:•the remittance basis ― broadly meaning that UK tax was only paid on foreign income and gains to the extent that these were brought to the UK in the tax year, or•the arising basis ― meaning UK tax was payable on worldwide income and gains arising in the tax yearFrom 6 April 2025, the remittance basis of taxation is repealed as a consequence of the abolition of the concept of domicile. This is replaced with a regime linked to the number of years of UK residency, which is colloquially referred to as the foreign income and gains regime (FIG regime). Although this is not a statutory term, it is used in this guidance note as a useful shorthand to reference the new regime. This regime is open to anyone who meets the residence conditions, including those who would have been considered UK domiciled prior to 6 April 2025. The FIG regime applies to the individual’s first four tax years of UK residence and means that the individual is not taxable in the UK on foreign income and gains arising in that four year period (with some exceptions).However, that does not mean the remittance basis rules can be forgotten, as advisers will still need to know and be able to apply the current rules for previously unremitted foreign

Foreign income and gains regime ― relief for foreign employment income

Foreign income and gains regime ― relief for foreign employment incomePrior to 6 April 2025, UK resident individuals who were not domiciled or deemed domiciled in the UK had the choice to pay tax on:•the remittance basis ― broadly meaning that UK tax was only paid on foreign income and gains to the extent that these were brought to the UK in the tax year, or•the arising basis ― meaning UK tax was payable on worldwide income and gains arising in the tax yearFrom 6 April 2025, the remittance basis of taxation is repealed as a consequence of the abolition of the concept of domicile. This is replaced with a regime linked to the number of years of UK residency, which is colloquially referred to as the foreign income and gains regime (FIG regime). Although this is not a statutory term, it is used in this guidance note as a useful shorthand to reference the new regime. This regime is open to anyone who meets the residence conditions, including those who would have been considered UK domiciled prior to 6 April 2025. The FIG regime applies to the individual’s first four tax years of UK residence and means that the individual is not taxable in the UK on foreign income and gains arising in that four year period (with some exceptions).Note that this does not mean the remittance basis rules can be forgotten, as advisers will still need to know and be able to apply the current

Weekly tax highlights ― 27 January 2025

Weekly tax highlights ― 27 January 2025Direct taxesFinance Bill 2025 roundup (24 January 2025): latest Government amendmentsThe Government has published a raft of amendments to be considered by the Public Bill Committee. Most of the changes affect the replacement of remittance basis / domicile Schedules.The Government has published a further batch of amendments to Finance Bill 2025 which will be considered (and almost certainly passed) by the Public Bill Committee, which is to begin its work on Tuesday 28 January 2025.Amendments are proposed as follows.Clause 21 ― PAYE / internationally mobile employeesChanges are made to clarify points around the application of ITEPA 2003 new s 690 and HMRC notices under new s 690A (Government amendments 15 to 19).Clause 37 ― non-doms changes: claims for relief on foreign incomeThis amendment provides for income treated as arising to a settlor of a trust as a result of a capital payment made by the trustees, to be eligible for relief to the extent that the deemed income arises from foreign income (Gov amend 20).Schedule 4 ― Pillar Two (multinational top-up tax)This is a further batch of amendments, following the original tranche released on 19 December 2024. The further amendments include the following:•new sections 198ZA to 198ZC (to be inserted into F(No 2)A 2023), replacing the original new s 198ZA. The changes provide that eligible payroll costs and eligible tangible asset amounts are allocated from flow-through entities in a manner that is consistent with the Pillar Two model rules (Gov amends 22,

Cap on unlimited income tax reliefs

Cap on unlimited income tax reliefsSTOP PRESS: The remittance basis is abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in FA 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.IntroductionThe cap on unlimited income tax reliefs applies from 6 April 2013. The cap only applies where the person claims more than £50,000 in reliefs in any one tax year. It acts to limit the relief for the tax year to the greater of:•£50,000•25% of the ‘adjusted total income’ (see below)ITA 2007, s 24A(1)–(5)This guidance note discusses the reliefs which are and are not subject to the cap as well as the operation of the cap. For more on the impact of the cap on claims over multiple tax years, see the Cap on unlimited income tax reliefs ― claims over more than one tax year guidance note. Basis period reform introduces a new element of total income, transition profits arising in 2023/24 including those taxed in any of the four subsequent tax years due to spreading relief. Transition profits are included in total income as a separate component.See the Tax year basis from 2024/25 onwards and Basis period transition rules 2023/24 guidance notes.Reliefs included in the capIn terms of the policy rationale as to which reliefs were

Childcare and workplace nurseries

Childcare and workplace nurseriesIntroductionA number of employers will provide workplace nursery facilities for their employees. The provision of childcare benefits affords some potentially large tax savings as it allows all or part of the childcare costs to be funded by the employer free of income tax and NIC. Broadly speaking, the legislation covers two forms of exemption: childcare provided at the workplace and other childcare.The various exemptions are found at ITEPA 2003, s 318 onwards.From 6 April 2017, there were significant changes to the operation of tax efficient childcare with the introduction of the ‘tax-free childcare’ scheme, and the other childcare schemes (the employer-contracted scheme and the childcare vouchers scheme) were closed to new entrants on 4 October 2018, subject to transitional arrangements for those already in the scheme. It is worth noting that the administration of many of the tax efficient schemes will be through public agencies rather than through employers.Workplace nurseriesWhere specific criteria are met, the provision of workplace nursery facilities are exempt from tax, NIC and reporting requirements. If these criteria are not met, then a taxable benefit may arise. The requirements for the exemption are found at ITEPA 2003, s 318 and relate to:•the child•the premises on which care is provided and the registration requirements•the person or persons who make the premises available•the extent to which the care is available to the employer’s employeesThe child must either be:•a child or stepchild of the employee, maintained at the employee’s expense•living

Seafarers’ earnings deduction

Seafarers’ earnings deductionThis guidance note sets out the conditions for workers on board a ship to obtain a 100% deduction from UK employment income for income tax, where work is partly or wholly overseas. The national insurance position is also considered. See also Checklist ― seafarers’ earning deduction.Working on board a ship, conditions for claiming seafarers' earnings deductionIndividuals who are employed on a ‘ship’ may claim a 100% deduction from UK earnings for income tax, where duties are performed wholly or partly outside the UK, during an eligible period. The deduction is usually referred to as the seafarers’ earning deduction (SED). The conditions are rigorous and are subject to anti-avoidance provisions. As will be seen below, the definition of seafarer is wide and can cover, for example, entertainers working on board a cruise ship. The definition of ship for SED excludes oil and gas exploration, and has implications for divers, especially where work may be within the UK continental shelf (see working as an employee on board a ship, below).The SED will be considered under the following headings: •employee tax residence and location of work •working as an employee on board a ship•qualifying periods •anti-avoidance •claims, notification and returns •pension payments, High Income Child Benefit Charge and student loans •national insurance.Employee tax residence and location of workSED is available to UK tax resident employees and to EEA resident employees who are seafarers. In both cases, SED is against UK employment income from

Foreign income and gains regime ― overview

Foreign income and gains regime ― overviewPrior to 6 April 2025, UK resident individuals who were not domiciled or deemed domiciled in the UK had the choice to pay tax on:•the remittance basis ― broadly meaning that UK tax was only paid on foreign income and gains to the extent that these were brought to the UK in the tax year, or•the arising basis ― meaning UK tax was payable on worldwide income and gains arising in the tax yearFrom 6 April 2025, the remittance basis of taxation is repealed as a consequence of the abolition of the concept of domicile. This is replaced with a regime linked to the number of years of UK residency, which is colloquially referred to as the foreign income and gains regime (FIG regime). Although this is not a statutory term, it is used in this guidance note as a useful shorthand to reference the new regime. This regime is open to anyone who meets the residence conditions, including those who would have been considered UK domiciled prior to 6 April 2025. The FIG regime applies to the individual’s first four tax years of UK residence and means that the individual is not taxable in the UK on foreign income and gains arising in that four year period (with some exceptions).Note that this does not mean the remittance basis rules can be forgotten, as advisers will still need to know and be able to apply the current rules for previously unremitted

Gifts of cash to charity

Gifts of cash to charityIndividuals receive income tax relief on donations they make to charities. There are three ways in which an individual can obtain income tax relief on cash donations to charity: by gift aid (also known as gift aid relief), by direct deduction from salary under payroll giving and by the retail gift aid scheme.For details of income tax relief available for non-cash donations, see the Gifts of quoted shares and land to charity guidance note.Note that donations to charity are not included in the cap on unlimited income tax reliefs. See the Cap on unlimited income tax reliefs guidance note for more information.Meaning of ‘charity’Donations from 6 April 2010 The definition of charity was significantly altered by FA 2010, extending UK income tax reliefs to charities based overseas in ‘relevant territories’ (ie countries in the European Economic Area). The EEA is comprised of the EU Member States plus Norway, Iceland and Liechtenstein. Although see ‘Repeal of application of gift aid to non-UK charities’ below. The post-5 April 2010 definition of a charity is a body of persons or a trust which:•is established for a charitable purpose only•meets the jurisdictional condition (ie under the jurisdiction of the UK courts or the courts in a relevant territory)•meets the registration condition (ie has complied with any requirement to be included in the register of charities kept under Charities Act 2011, s 30 or with a similar requirement to be included in an equivalent register in a relevant

Married couple’s allowance

Married couple’s allowanceThe married couple’s allowance (MCA) is only available if one of the two spouses or civil partners was born before 6 April 1935. This means that one member of the couple must be at least 91 years old on 5 April 2026 to qualify for an allowance in the 2025/26 tax year.There is a distinction in the legislation between couples that married before 5 December 2005 and those that married or entered a civil partnership from this date.Unlike the personal allowance, the MCA is a ‘tax reducer’, not a deduction from net income. Also, MCA can be transferred between spouses / civil partners, although the amount of the allowance is always calculated by reference to the primary claimant.The MCA is reduced where:•the marriage / civil partnership took place in the tax year, or•the primary claimant’s ‘adjusted net income’ exceeds £37,700 for 2025/26 (£37,000 for 2024/25)The commentary in this guidance note applies equally to those in civil partnership as it does to those who are married. For simplicity, the text refers to ‘spouse’, ‘married couples’ and ‘marriage’, but this should be read as ‘spouse or civil partner’, etc.Note that if an individual is entitled to the MCA they will not be mandated to join Making Tax Digital for income tax until April 2029 at the earliest, even if their income exceeds the threshold. See the Making Tax Digital for income tax (MTD IT) ― overview guidance note. This guidance note does not discuss the ‘transferable tax