http://www.legislation.gov.uk/ukpga/2007/3/section/23/notesIncome taxTaxInvestmentIncomeLegislationExplanatory Notes to Income Tax Act 2007HM Revenue and CustomsKing's Printer of Acts of Parliament2018-08-30 3 20 March 2007 83 This section sets out the steps to be taken in calculating a taxpayer’s liability to income tax for a tax year. It is based on many provisions in the source legislation, in particular section 835 of ICTA. 84 Step 1 brings together all the amounts of income on which a taxpayer is charged to income tax for the tax year. The sum of these amounts is called “total income”, and each of the amounts is a “component” of total income. 85 In the source legislation there were some contexts in which “total income” was used in a different sense (eg in section 1 of ICTA, where it meant what is defined in Step 2 as “net income”). But in this Act it is used consistently to denote this first stage result. And the consequential amendments to other legislation in Schedule 1 ensure that it will always be used in this sense elsewhere. 86 Step 2 deals with those reliefs (other than personal allowances) which are given by deduction from income. 87 Most of the reliefs listed in section 24 may be deducted from any type of income. But some may only be deducted from certain components of total income. See section 25(3). 88 Step 2, combined with the provisions about the reliefs themselves and the rules in section 25 about the way in which deductions are made, ensures that the reliefs are allowed in the proper way to arrive at “net income”. 89 It is important that this is done by reference to the components of total income, to pave the way for Step 4. 90 Step 3 deals with the deduction of the personal allowance and blind person’s allowance from the components of net income. This step only affects individuals. The rule that these deductions come last is based on section 835(5) of ICTA. 91 Again, it is important that this is done by reference to the components of total income, to pave the way for Step 4. 92 Step 4 applies the rates of tax specified in Chapter 2 (and, where the taxpayer is a trustee, the relevant Chapters of Part 9 of this Act) to the amounts of the components remaining after Step 3. 93 Step 5 adds together the amounts of tax on each component. 94 Step 6 then deducts any tax reductions. These are listed in section 26. Further rules about how these tax reductions are made are in sections 27 to 29. 95 Step 7 then adds on certain other amounts of income tax for which a taxpayer may be liable, as listed in section 30.