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ACCA Strategic Professional · Advanced Taxation (UK) · Tax administration and the UK tax system

Under the rates provided for the ATX-UK exam (Finance Act 2025), which statement correctly describes the cap on income tax reliefs?

The cap on income tax reliefs is the higher of £50,000 or 25% of income, unless the relief is otherwise restricted. The 25% limb gives a larger cap once income exceeds £200,000, so the cap is not a flat £50,000.

  1. AUnless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of incomeCorrect
  2. BUnless otherwise restricted, reliefs are capped at the lower of £50,000 or 25% of income
  3. CUnless otherwise restricted, reliefs are capped at the higher of £25,000 or 50% of income
  4. DUnless otherwise restricted, reliefs are capped at a flat £50,000 regardless of income

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 option ignores the 25% of income alternative, which gives a higher cap for people with income above £200,000.

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