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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the scope of income tax, residence and overseas aspects

In 2025/26 Tomas, a UK resident, has non-savings income of £250,000 (all within the personal allowance rules already applied, taxable) and no other income. He makes a trading loss relief claim against general income of £80,000 and the loss relief is subject to the cap on income tax reliefs. Unless otherwise restricted, what is the maximum relief that can be given in 2025/26 in total for the capped reliefs?

The maximum is £62,500. Capped income tax reliefs are limited to the higher of £50,000 or 25% of income, and 25% of Tomas's £250,000 income is £62,500, which is higher than £50,000, so his £80,000 claim is restricted.

  1. A£50,000
  2. B£62,500Correct
  3. C£80,000
  4. D£25,000

Explanation

The cap is the higher of £50,000 or 25% of income. 25% of £250,000 is £62,500, which exceeds £50,000, so the cap is £62,500. The £80,000 claim is therefore restricted by £17,500.

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