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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 is correct about the cap on income tax reliefs under the ATX-UK tax tables?

The cap is the higher of £50,000 and 25% of income, and so it only exceeds £50,000 where income is above £200,000. At £200,000 of income, 25% equals £50,000, so for lower incomes the £50,000 figure applies.

  1. AThe cap is a fixed £50,000 for all taxpayers
  2. BThe cap is the lower of £50,000 and 25% of income
  3. CThe cap is the higher of £50,000 and 25% of income, so it exceeds £50,000 only when income exceeds £200,000Correct
  4. DThe cap applies only to additional rate taxpayers

Explanation

The cap is the higher of £50,000 or 25% of income. 25% of income exceeds £50,000 only when income is above £200,000 (25% × £200,000 = £50,000). The other options misstate the test or its scope.

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