ACCA Strategic Professional · Advanced Taxation (UK) · Tax administration and the UK tax system
Under the ATX-UK tax tables, Rakesh has pension and other reliefs of £70,000 and income of £400,000, and no other restriction applies. What is the maximum amount of income tax relief available to him under the cap on income tax reliefs?
The cap is the higher of £50,000 or 25% of income. With income of £400,000, 25% is £100,000, which exceeds £50,000, so the cap is £100,000. Rakesh's £70,000 of reliefs fall within it and are not restricted.
- A£100,000Correct
- B£50,000
- C£70,000
- D£400,000
Explanation
Reliefs are capped at the higher of £50,000 or 25% of income. 25% of £400,000 is £100,000, which is higher than £50,000. Since £100,000 exceeds his £70,000 of reliefs, the cap does not restrict him; the maximum capacity under the cap is £100,000.
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