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Tax relief |
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Tax reliefThe government allows an artificially low tax rate to encourage purchases or savings such as with pensions and ISA's.Tax reliefAmounts which you can deduct from your annual income to reduce the amount on which you have to pay tax. For instance, if your income before deduction of reliefs is £20,000, and you made pension contributions in the year of £1,000, you could deduct £1,000 from £20,000 to produce a total income of £19,000. That is because pension contributions are payments on which the Inland Revenue allows you to get relief.From total income, you would also deduct any allowances, including your personal allowance of £4,615 in the year 2003-2004 for people under 65, to produce your taxable income.Similar MatchesDebt reliefDebt reliefAny arrangement intended to reduce the burden of debt on a country, usually including forgiveness of part or all of what is owed to creditors who may include private banks and other entities, government, or international financial institutions. Debt reliefDebt reliefReducing the principal and/or interest payments on Less developed country loans. Retirement reliefRetirement reliefA special relief for Capital Gains Tax purposes which applies when an individual aged 55 or over disposes of his business or an interest in a business. Taper reliefTaper reliefTaper relief was introduced into the UK taxation regime with effect from 6th April 1998. Its purpose is similar to indexation, in that it aims to reduce the amount of capital gains tax you have to pay when you sell shares, to account for the effect of inflation.But there is a critical difference. Whereas indexation works by increasing the base cost of an asset, taper relief works by reducing the gain by a 5% a year for every year it was held regardless of the base cost. This is significant because if the base cost of an asset was zero, indexation does not help. Taper relief, on the other hand, does. To qualify for taper relief, your shares have to be held for a minimum of 3 years. If you sell within that period, no taper relief will be available.For each whole year that you have held shares from the date of acquisition to the date of disposal, you can reduce the gain by 5%. The maximum relief available is 40%, after 10 years.Assets held on or before 17 March 1998 qualify for an additional year of taper relief, and the 'three year' requirement does not apply.ExampleYou buy 1,000 shares in Multimower plc in February 1998 for £2,000You sell the shares in August 2000 for £5,000You pre-taper gain is £3,000. Taper relief is available for three years (15%) = £750Your reduced gain is £2,250Note that in the above example, taper relief was available even though the shares had not been held for three years, because they were owned on 17th March 1998.Taper relief applies to each individual share acquisition, so if you dispose of a holding built up over a number of years after 5 April 1998 then the gain on each acquisition has to be calculated individually and taper relief applied to each one individually. The good news is that a holding which you had at 5 April 1998 can be treated as one element, as shown above. Double taxation reliefDouble taxation reliefPeople resident and domiciled in the UK are liable to income tax from their world-wide income payable to the Inland Revenue. Other countries operate similar taxation rules so that there could arise a situation where an individual is subjected to double taxation. Double taxation relief can be obtained when agreements exist between countries whereby tax already paid on income in a foreign country is offset against the same tax liability in the home country or vice versa. Further Suggestionsagricultural property relieflife assurance premium relief Import relief rollover relief holdover relief mortgage interest relief at source business property relief |
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