Capping tax reliefs
1.191 Tax reliefs exist for good reasons, to promote activities such as business investment and philanthropy. But it is unfair that reliefs can be used without limit to reduce tax liabilities, so that some taxpayers with very high incomes have very low tax rates.
1.192 To curtail this excessive use of reliefs the Government will introduce a limit on all uncapped income tax reliefs. For anyone seeking to claim more than £50,000 of reliefs, a cap will be set at 25 per cent of income. This will increase effective tax rates and help ensure that those with the highest incomes pay a fairer share. This will not be extended to those reliefs that are already capped, as to do so would reduce the amount of support the tax system gives, for example, to enterprise and pension contributions.
1.193 The Government will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations.