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ACCA Applied Skills · Taxation (UK) · The use of exemptions and reliefs in deferring and minimising income tax liabilities

Under the Finance Act 2025 tax tables used in TX-UK, the cap on certain income tax reliefs is set at which of the following?

The cap on income tax reliefs is the higher of £50,000 or 25% of income, unless the relief is otherwise restricted. A taxpayer therefore always has at least £50,000 of relief available, and more if 25% of their income exceeds that figure.

  1. AThe higher of £50,000 or 25% of incomeCorrect
  2. BThe lower of £50,000 or 25% of income
  3. CThe higher of £25,000 or 50% of income
  4. DA fixed amount of £50,000 whatever the level 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, so it would restrict relief for high earners far more than the rules intend. A fixed £50,000 ignores the 25% of income alternative.

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