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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 Finance Act 2025 data provided for ATX-UK, which statement correctly describes the cap on income tax reliefs that applies to an individual, where no other restriction applies?

The cap on income tax reliefs is the higher of £50,000 or 25% of income, unless the reliefs are otherwise restricted. This means taxpayers with income below £200,000 have a £50,000 cap, while those with higher income can claim more, up to 25% of income.

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

Explanation

The cap is stated as the higher of £50,000 or 25% of income, unless otherwise restricted. The 'lower of' option reverses this. A flat £50,000 ignores the 25% alternative that helps higher earners, and 25% alone ignores the £50,000 floor that protects lower earners.

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