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

Which statement about the cap on income tax reliefs is correct, based on the ATX-UK Tax Rates and Allowances?

The cap is the higher of £50,000 or 25% of income, applying unless a relief is otherwise restricted. It is not tied to the additional rate threshold or the pension annual allowance, and it does not use the lower of the two figures.

  1. AThe cap applies only to taxpayers with income above £125,140
  2. BThe cap applies only where reliefs exceed the pension annual allowance of £60,000
  3. CThe cap is the higher of £50,000 or 25% of income, subject to any other specific restrictionCorrect
  4. DThe cap is always the lower of £50,000 and 25% of income

Explanation

The cap is stated as the higher of £50,000 or 25% of income, applying unless otherwise restricted. It is not linked to the additional rate threshold or the pension annual allowance. The 'lower of' option reverses the test.

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