ACCA Applied Skills · Taxation (UK) · The scope of income tax
Unless otherwise restricted, what is the cap on income tax reliefs that an individual can claim in a tax year, according to the tax rates and allowances provided in the TX-UK exam (Finance Act 2025)?
The cap on income tax reliefs is the higher of £50,000 or 25% of income, unless the reliefs are otherwise restricted. The 25% of income measure therefore only matters once income exceeds £200,000, because below that level £50,000 is the greater figure.
- AThe higher of £50,000 or 25% of incomeCorrect
- BThe lower of £50,000 or 25% of income
- CThe higher of £25,000 or 50% of income
- 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. The fixed £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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