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The calculation of income tax Liabilities is usually done by a person's tax adviser (usually using a software package) or by HMRC following submission of a tax return, rather than by a tax Lawyer, although lawyers who deal with Trust Administration will often also calculate income tax for the trust. It is however useful to understand the way in which the liability is calculated in order to be able to advise a client what impact a particular action or decision is likely to have on their tax liability, for example the ability to claim loss relief.

There are seven steps that must be undertaken in order to calculate a person's income tax liability for a tax year. The seven steps are:

1. •

   step 1—calculate total income

2. •

   step 2—deduct tax reliefs

3. •

   step 3—deduct allowances

4. •

   step 4—calculate the tax at applicable rates; and step 5—add the tax amounts together

5. •

   step 6—deduct tax reducers

6. •

   step 7—add additional tax amounts