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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the use of exemptions and reliefs in deferring and minimising income tax liabilities

Which statement correctly describes the cap on income tax reliefs in the ATX-UK tax rates and allowances for Finance Act 2025?

The cap on income tax reliefs is the higher of £50,000 or 25% of income, unless otherwise restricted. A taxpayer therefore always has at least £50,000 of relief available, and more where 25% of income exceeds that figure.

  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 a flat £50,000 whatever the level of income
  4. DUnless otherwise restricted, reliefs are capped at 25% of income with no minimum amount

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, and the flat and percentage-only options ignore one limb of the cap.

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