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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 rates and allowances provided for the exam, which statement about the cap on income tax reliefs is correct?

Unless otherwise restricted, the cap on income tax reliefs is the higher of £50,000 or 25% of income. It is not the lower of the two, and it is not a flat £50,000 or a pure percentage of income.

  1. ACertain reliefs are capped at the higher of £50,000 or 25% of income unless otherwise restrictedCorrect
  2. BReliefs are capped at the lower of £50,000 or 25% of income
  3. CReliefs are capped at £50,000 regardless of the level of income
  4. DReliefs are capped at 25% of income with no fixed monetary amount

Explanation

The exam tables state that, unless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of income. The lower-of version reverses the test, and the other options ignore one limb of the rule.

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