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ACCA Applied Skills · Taxation (UK) · The use of exemptions and reliefs in deferring and minimising income tax liabilities

Priya, a UK resident, has taxable non-savings income of £20,000 in 2025–26 after deducting her personal allowance, plus no other income. She wants to know how much of her basic rate band is left. Using the rates in the Finance Act 2025 tax tables, what amount of the basic rate band remains unused?

£17,700 of the basic rate band remains. The £37,700 band is applied to taxable income after the personal allowance, so £20,000 of taxable income uses part of it, leaving £37,700 less £20,000, which is £17,700.

  1. A£17,700Correct
  2. B£37,700
  3. C£7,130
  4. D£25,000

Explanation

The basic rate band is £37,700 and is applied to taxable income, which is already after the personal allowance. Taxable income of £20,000 uses £20,000 of the band, leaving £37,700 - £20,000 = £17,700. Using £37,700 ignores the income already taxed, and £7,130 wrongly deducts the allowance again from gross income.

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