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The income tax calculation for individuals is prescribed by the steps in ITA 2007, s 23 and is discussed in detail in E1.101B. That article also discusses the tax resulting from any transition profits arising due to basis period reform.

At Step 2 of the income tax calculation, certain losses or payments can be deducted from income. This takes place before the deduction of the personal allowance at Step 3 of the calculation.

Step 2 reliefs fall into two categories:

1. Ìý

   •ÌýÌýÌýÌý deductions from component income (meaning that relief can be obtained only against a certain category or categories of income), or

2. Ìý

   •ÌýÌýÌýÌý deductions from total income

For a comprehensive list of Step 2 reliefs, including whether relief is allowed against component income or total income, see E1.101C.

From 2013/14 onwards, there is a limit to the amount of Step 2 reliefs that can be set against total income in the tax year. This is often referred to as the 'cap on income tax reliefs' and applies to individuals