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ACCA Strategic Professional · Advanced Taxation (UK) · Investment and other expenditure that reduces tax liabilities

Under the rules provided in the ATX-UK tax rates and allowances, which statement correctly describes the cap on income tax reliefs for 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 relief is otherwise restricted. Taxpayers with modest income therefore still get £50,000 of reliefs, while those with larger income can claim up to a quarter of it.

  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 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, and the flat or percentage-only options ignore that the cap is the greater of the two measures.

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