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ACCA Applied Skills · Taxation (UK) · The comprehensive computation of taxable income and income tax liability

Under the Finance Act 2025 tax tables, certain income tax reliefs (for example trading loss relief against total income) are capped unless otherwise restricted. What is the cap?

The cap on income tax reliefs is the higher of £50,000 or 25% of the taxpayer's income, unless a relief is otherwise restricted. The cap therefore never falls below £50,000, and it rises above that figure only when 25% of income exceeds £50,000.

  1. AThe higher of £50,000 or 25% of incomeCorrect
  2. BThe lower of £50,000 or 25% of income
  3. CA fixed £50,000 for all taxpayers
  4. D25% of income with no fixed monetary amount

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 fixed £50,000 and 25%-only options each ignore one limb of the higher-of rule.

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