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For the latest New Development, see ND.2740.

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.

Step 1 of the income tax calculation involves identifying the amount of component income (eg employment income, self-employment income, savings income and dividend income) that is taxable in the tax year. At Step 2, deductions are made from either component income or total income, depending on the underlying rules for the reliefs. Examples of Step 2 reliefs are trading losses, property business losses and qualifying loan interest, see E1.101C. Allowances such as the personal allowance are deducted at Step 3.

The commentary below concerns Step 4 of the income tax calculation, where the tax bands and rates are applied to the individual's income for the tax year.

In terms of the later stages of the calculation, at Step 5 these amounts are added together to give