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ACCA Applied Skills · Taxation (UK) · The scope of income tax

Elena has income of £500,000 for 2025/26 for cap purposes. She claims reliefs subject to the cap of £110,000 and £30,000. The cap on income tax reliefs applies with no other restriction. By how much are her claimed reliefs in excess of the cap?

The excess is £15,000. The cap is 25% of £500,000, which is £125,000, being higher than £50,000. Total claimed reliefs are £140,000, so £15,000 exceeds the cap and is not deductible.

  1. A£15,000Correct
  2. B£90,000
  3. C£140,000
  4. D£0

Explanation

25% of £500,000 is £125,000, which exceeds £50,000, so the cap is £125,000. Total claimed is £110,000 + £30,000 = £140,000. The excess is £140,000 - £125,000 = £15,000. £90,000 wrongly uses the £50,000 cap, giving £140,000 - £50,000.

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