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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the use of exemptions and reliefs in deferring and minimising income tax liabilities

Priya is an additional rate taxpayer with substantial employment income. She is considering a large pension contribution and wishes to know the general cap that applies to certain income tax reliefs she may claim against total income. Under the rates and allowances provided for ATX-UK (Finance Act 2025), what is the cap on income tax reliefs, unless otherwise restricted?

Income tax reliefs are capped at the higher of £50,000 or 25% of income, unless otherwise restricted. The cap is not the lower of the two figures, and the £60,000 pension annual allowance is a separate limit that should not be confused with it.

  1. AThe higher of £50,000 or 25% of incomeCorrect
  2. BThe lower of £50,000 or 25% of income
  3. CThe higher of £60,000 or 25% of income
  4. DA fixed amount of £50,000 regardless of income

Explanation

The tax tables state that, unless otherwise restricted, income tax reliefs are capped at the higher of £50,000 or 25% of income. The 'lower of' option reverses the test. The £60,000 figure is the pension annual allowance, not the reliefs cap.

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