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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the comprehensive computation of taxable income and the income tax liability

Under the cap on income tax reliefs provided in the ATX-UK Tax Rates and Allowances, which statement correctly describes 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, applying unless the relief is otherwise restricted. A taxpayer therefore always has at least £50,000 of capacity and gets more if 25% of their income exceeds that figure.

  1. AReliefs are capped at the higher of £50,000 or 25% of incomeCorrect
  2. BReliefs are capped at the lower of £50,000 or 25% of income
  3. CReliefs are capped at a flat £50,000 whatever the level of income
  4. DReliefs are capped at 25% of income with no minimum figure

Explanation

The tax rates and allowances 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 flat £50,000 and the 25%-only options each ignore one limb of the cap.

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