Hi there, what is the difference between tax deductions and tax reliefs? is it : tax deduction: reduces the taxable income under which we get taxed tax reliefs: reduces the amount of tax paid ? my question arises actually from apr 2014 q3 where in pension product says: tax relief on contributions and in benefits of borrowing: interest payments and tax deductible. thanks
Hi, I dont think there is really a great difference to worry about here. Certainly not at the level of an SP5 exams. Deduction seems to refer to something a company deducts from profits to get to the profit before tax (like expenses or interest). Relief seems to refer to a contribution that reduces taxable earnings for an individual which may be voluntary, such as a pension contribution.