ACCA Applied Skills · Taxation (UK) · The comprehensive computation of taxable income and income tax liability
Priya has income of £120,000 for 2025/26. She makes a claim for a relief that is subject to the cap on income tax reliefs and is not otherwise restricted. What is the maximum relief she can obtain?
The maximum relief is £50,000. The cap is the higher of £50,000 or 25% of income, and 25% of £120,000 is only £30,000, so the £50,000 figure applies and limits the relief Priya can claim.
- A£30,000
- B£50,000Correct
- C£120,000
- D£70,000
Explanation
25% of £120,000 is £30,000. The cap is the higher of £50,000 and £30,000, which is £50,000. Using £30,000 wrongly applies 25% without checking the £50,000 floor.
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