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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the comprehensive computation of taxable income and the income tax liability

Which income level is the point above which 25% of income exceeds £50,000, so that the cap on income tax reliefs becomes more than £50,000?

The cap exceeds £50,000 only when income is above £200,000. At that level 25% of income equals £50,000, so the higher-of rule gives a larger cap only for income beyond £200,000.

  1. A£125,000
  2. B£150,000
  3. C£200,000Correct
  4. D£250,000

Explanation

The 25% figure exceeds £50,000 when income exceeds £50,000 ÷ 0.25 = £200,000. At £200,000 both measures equal £50,000. The other values give a 25% figure of £31,250, £37,500 or £62,500, and the last is not the break-even point.

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