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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the comprehensive computation of taxable income and the income tax liability

Marcus has total income of £180,000 for 2025/26, of which £20,000 is dividend income. He has £62,000 of reliefs subject to the cap and not otherwise restricted. Assume the cap is calculated on his total income of £180,000. What amount of reliefs is disallowed by the cap?

£12,000 is disallowed. The cap is the higher of £50,000 or 25% of £180,000 (£45,000), so £50,000. Marcus's reliefs of £62,000 exceed this by £12,000, which cannot be deducted.

  1. A£nil
  2. B£12,000Correct
  3. C£17,000
  4. D£45,000

Explanation

25% of £180,000 is £45,000, lower than £50,000, so the cap is £50,000. Reliefs of £62,000 exceed it by £12,000, which is disallowed. £17,000 wrongly compares against £45,000. £45,000 is the 25% figure, not the excess.

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