ACCA Applied Skills · Taxation (UK) · The scope of income tax
Hannah has total income of £300,000 for 2025/26. She has relief of £90,000 that is subject to the cap on income tax reliefs and no other reliefs. What is the amount of relief she can deduct?
The cap is the higher of £50,000 or 25% of income. For Hannah, 25% of £300,000 is £75,000, which exceeds £50,000. Her £90,000 of capped reliefs is therefore restricted, and she can deduct £75,000 only.
- A£50,000
- B£75,000Correct
- C£90,000
- D£210,000
Explanation
The cap is the higher of £50,000 and 25% × £300,000 = £75,000. The cap is therefore £75,000. Her relief of £90,000 exceeds it, so only £75,000 is deductible. £50,000 wrongly uses the fixed amount without comparing it with 25% of income.
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