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

Priya, a UK resident, has adjusted net income of £125,140 in 2025/26. Which statement about her personal allowance is correct?

Her personal allowance is nil. Once adjusted net income reaches £125,140 the whole £12,570 allowance has been withdrawn, because it is reduced by £1 for every £2 of income above £100,000. Residence alone does not preserve the allowance.

  1. AHer personal allowance is reduced to zeroCorrect
  2. BHer personal allowance is £6,285
  3. CHer personal allowance is £12,570 because she is UK resident
  4. DHer personal allowance is £1,260 as the transferable amount

Explanation

The personal allowance is reduced where adjusted net income exceeds £100,000, by £1 for every £2 of excess. At £125,140 the excess is £25,140, so the reduction is £12,570 and the allowance is nil. The figure of £6,285 would arise only if the reduction were taken as £1 for every £4 of excess.

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