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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.

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.

Steps 4 and 5 involve calculating the income tax liability, by applying the income tax bands and rates to the individual's income for the tax year, see E1.101E.

The commentary below covers the Step 6 tax reducers which are deducted from the income tax liability.

In terms of the later stages of the