Knowledgebase Support HMRC Useful links
Knowledgebase home
Tax Return Production
Accounts Production
Practice Management
VAT Filer
CloudConnect
Anti-Money Laundering
Support home
Hot Topics
SimpleStep Guides
Release Notes
Technical
Known Issues

HMRC Status
Useful Links
MTD for Agents MTD for Businesses What is MTD
Preparation
Agent Services Account
MTD for VAT
MTD for Income Tax
MTD for VAT
Digital Record Keeping
Quarterly Updates
Step-by-step Guide
HMRC's MTD Timeline
TaxCalc's MTD Journey

HMRC Exlusion 103 - income tax relief beneficial ordering when income above basic rate band

Article ID: 3036
Last updated: 11 Dec, 2019

HMRC Filing Exclusion 103 will affect customers with non-savings and savings income of more than the basic rate band and  there are reliefs and allowances of more than the basic rate band (usually £34,500). Some of the relief will be set against dividend income when it is more beneficial to set against non-savings or savings income. This is because the SA tax calculator is not taking into account the tax reduction for non-savings/savings income above the basic rate band.

Below is an example of how the calculation is currently working and a revised calculation showing how the relief could be used more beneficially.

Current calculation
Non Savings Savings Dividends Total Tax
(Employment)
Income 66,500.00 21,000.00 20,000.00 107,500.00
PA -11,850.00 -11,850.00
Relief for loan interest -35,650.00 -14,350.00 -50,000.00
Taxable 19,000.00 21,000.00 5,650.00 45,650.00
Starting rate 0% 0.00 0.00
0% 500.00 2,000.00 2,500.00 0.00
7.5% 0.00 0.00
20% 19,000.00 15,000.00 34,000.00 6,800.00
32.5% 3,650.00 3,650.00 1,186.25
40.00% 5,500.00 5,500.00 2,200.00
19,000.00 21,000.00 5,650.00 45,650.00 10,186.25
Net tax payable 10,186.25
Beneficial ordering
Non Savings Savings Dividends Total Tax
Income 66,500.00 21,000.00 20,000.00 107,500.00
PA -11,850.00 -11,850.00
Relief for loan interest -50,000.00 -50,000.00
Taxable 4,650.00 21,000.00 20,000.00 45,650.00
Starting rate 0% 0.00 0.00
0% 500.00 2,000.00 2,500.00 0.00
7.5% 6,850.00 6,850.00 513.75
20% 4,650.00 20,500.00 25,150.00 5,030.00
32.5% 11,150.00 11,150.00 3,623.75
40.00% 0.00 0.00
4,650.00 21,000.00 20,000.00 45,650.00 9,167.50
Net tax payable 9,167.50

In the example above, the relief for loan interest in the original calculation is partially used against dividend income, whereas the beneficial calculation has used it all against non savings income, resulting in a tax savings of £1,018.75.

If you have a scenario which applies to this exclusion, a paper return should be filed together with a Reasonable Excuse form which refers to the exclusion number.

To print your tax return with a Reasonable Excuse form:

  1. Go to Check and Finish and select Print.
  2. Within Printing Preferences, select HMRC within Who is it for? This will ensure that the reasonable excuse form is ticked.
  3. At the bottom of the screen you will see a 'Click here' to enable the entries to be made on the Reasonable excuse form.
  4. Click Close once completed. 
  5. Create Preview to check pages. 
  6. Hover the mouse over the return to see the Print options.

Article ID: 3036
Last updated: 11 Dec, 2019
Revision: 3
Views: 2
This article was: