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

Priya has a salary of £110,000 in 2025/26 and no other income. She has made no pension contributions. She makes a gross personal pension contribution of £20,000. Her adjusted net income for the personal allowance is therefore £90,000. Using standard 2025/26 rules where the personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000, what is her personal allowance after the contribution?

Her personal allowance is the full £12,570. The gross £20,000 pension contribution reduces adjusted net income from £110,000 to £90,000, which is below the £100,000 threshold, so no abatement applies. Without the contribution, the allowance would have been cut by £5,000 to £7,570.

  1. A£12,570Correct
  2. B£7,570
  3. C£2,570
  4. DNil

Explanation

Adjusted net income is found by deducting the gross pension contribution from net income: £110,000 less £20,000 = £90,000. This is below £100,000, so no reduction of the personal allowance applies and she keeps the full £12,570. Without the contribution, income would be £10,000 over the threshold and the allowance would have reduced by £5,000 to £7,570. The £7,570 option applies that reduction to the uncontributed figure.

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