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ACCA Strategic Professional · Advanced Taxation (UK) · Investment and other expenditure that reduces tax liabilities

Hannah has total income of £300,000 for 2025/26. Assuming no other restriction applies, what is the maximum amount of income tax reliefs she can deduct under the cap?

Hannah's maximum reliefs are £75,000. The cap is the higher of £50,000 or 25% of income, and 25% of her £300,000 income is £75,000, which is more than £50,000, so the percentage limb applies.

  1. A£50,000
  2. B£60,000
  3. C£75,000Correct
  4. D£300,000

Explanation

The cap is the higher of £50,000 or 25% of income. 25% × £300,000 = £75,000, which exceeds £50,000, so the cap is £75,000. Using £50,000 ignores the percentage limb.

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