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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

Tobias has total earnings of £120,000 and pays a personal pension contribution. He has no unused annual allowance from earlier years, and his threshold income and adjusted income are below the tapering limits. Under the ATX-UK tables (Finance Act 2025), which statement is correct about the annual allowance for 2025/26?

The annual allowance for 2025/26 is £60,000, reduced towards the £10,000 minimum only where threshold income exceeds £200,000 and income exceeds £260,000. Tobias is below these limits, so the full £60,000 is available. The £40,000 figure applied only to 2022/23.

  1. AThe annual allowance is £40,000
  2. BThe annual allowance is £60,000, and it tapers only if threshold income exceeds £200,000 and income exceeds £260,000Correct
  3. CThe annual allowance is £60,000 and tapers once income exceeds £200,000 regardless of threshold income
  4. DThe annual allowance is £10,000 because his earnings exceed £100,000

Explanation

For 2023/24 to 2025/26 the annual allowance is £60,000. Tapering applies only where threshold income exceeds £200,000 and income exceeds £260,000, down to a £10,000 minimum. £40,000 was the 2022/23 figure. Tobias is below the limits so no taper applies.

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