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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

Under the cap on income tax reliefs for ATX-UK (Finance Act 2025), which of the following states the limit that applies to reliefs that are not otherwise restricted?

The cap on income tax reliefs is the higher of £50,000 or 25% of income, unless the relief is otherwise restricted. A taxpayer with income above £200,000 therefore gets a cap of 25% of income, while others are capped at £50,000.

  1. AThe lower of £50,000 or 25% of income
  2. BThe higher of £50,000 or 25% of incomeCorrect
  3. CA fixed £50,000 for every taxpayer
  4. DThe higher of £60,000 or 25% of income

Explanation

The tax tables state that, unless otherwise restricted, 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, which is a separate limit.

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