ACCA TX Exam 1

✅ Correct answer: £120,000 on 14 October 2025

📌 Explanation: With one associated company the large company threshold is £1,500,000 / 2 = £750,000. Augmented profits of £2,100,000 exceed it, so Amaanyi Freight Ltd pays four quarterly instalments of 25% of the expected liability: £480,000 / 4 = £120,000. The first falls on the 14th day of the seventh month of the accounting period that starts on 1 April 2025, which is 14 October 2025.

❌ Why the other options are wrong: £120,000 on 14 July 2025 counts the seventh month from the wrong starting point; £160,000 on 14 October 2025 splits the liability into three instead of four instalments; £480,000 on 1 January 2027 is the normal due date for a company that is not large.

📋 Objective: 1.4 (Time limits for returns, claims and payment of tax, including payments on account)

✅ Correct answer: Non-resident: 2 ties, 3 needed

📌 Explanation: None of the automatic overseas or automatic UK tests is met (100 days, a home in South Africa, no full-time UK work), so the sufficient ties test applies. Nomvula was not UK resident in any of the previous three tax years, so with 91 to 120 days she needs three ties. She has an accommodation tie and a work tie (40 or more days) only, so she is not UK resident for 2025/26.

❌ Why the other options are wrong: Resident with two ties needed uses the 121 to 182 day row; resident with three ties wrongly counts a 90-day tie, although she had never spent time in the UK before; four ties needed uses the 46 to 90 day row instead of 91 to 120 days.

📋 Objective: 2.1 (The scope of income tax)

✅ Correct answer: £5,500

📌 Explanation: A claim against total income sets the loss against all of that year's income and cannot be restricted to keep the personal allowance. The 2025/26 claim uses £8,000 and the 2024/25 claim uses £28,500 (£21,000 + £7,500), a total of £36,500, so £42,000 − £36,500 = £5,500 is carried forward against future profits of the same trade. The cap on relief against other income is not reached.

❌ Why the other options are wrong: £13,500 makes only the 2024/25 claim and ignores the current-year claim; £34,000 makes only the 2025/26 claim; £26,070 wrongly limits the claims to preserve the personal allowance, which is not allowed, although it wastes the allowance.

📋 Objective: 2.3 (Income from self-employment)

✅ Correct answer: £471,000

📌 Explanation: A long period of account is split into a first accounting period of 12 months (to 31 December 2025) and a second of 3 months (to 31 March 2026). Trading profit before capital allowances is time-apportioned: £600,000 × 12/15 = £480,000. Capital allowances are computed for each accounting period separately: the first gets a writing down allowance of £50,000 × 18% = £9,000, so the trading profit is £471,000. The new plant falls in the second period.

❌ Why the other options are wrong: £431,000 also gives full expensing on the plant, which was bought in the second accounting period; £468,750 scales the writing down allowance up for 15 months instead of computing it for 12; £591,000 does not split the 15-month profit at all.

📋 Objective: 5.1 (The scope of corporation tax)

✅ Correct answer: £19,000 and £1,800

📌 Explanation: For residential lettings by individuals, finance costs are not deducted in computing property income: £24,000 − £5,000 = £19,000. Instead a basic rate tax reducer of 20% of the lowest of the finance costs, the property profits and the adjusted total income above the personal allowance is given: 20% × £9,000 = £1,800.

❌ Why the other options are wrong: £10,000 and £0 deducts the mortgage interest in full as for a company; £19,000 and £3,600 gives relief at her 40% marginal rate instead of the 20% basic rate; £10,000 and £1,800 double counts the relief by deducting the interest and also giving the reducer.

📋 Objective: 2.4 (Property and investment income)

✅ Correct answer: 12 September 2026

📌 Explanation: Where an individual files the return by the due date, HMRC must give notice of a compliance check within 12 months of the date the return was actually delivered. Florence filed online on 12 September 2025, well before the 31 January 2026 deadline, so the window closes on 12 September 2026.

❌ Why the other options are wrong: 31 January 2027 is 12 months after the filing deadline, the old rule that no longer applies; 31 October 2026 applies the quarter-day rule, which is used only for returns filed late; 5 April 2029 is the four-year limit for a discovery assessment, not for a compliance check.

📋 Objective: 1.5 (Compliance checks, appeals and disputes)

✅ Correct answer: £4,500

📌 Explanation: Employer's Class 1 NIC is 15% of each employee's earnings above the £5,000 secondary threshold: 4 × (£30,000 − £5,000) × 15% = £15,000. The company is eligible for the £10,500 employment allowance because it has employees other than a director, so it pays £15,000 − £10,500 = £4,500.

❌ Why the other options are wrong: £15,000 ignores the employment allowance; £3,300 uses the old 13.8% rate; A nil liability uses the £12,570 employee threshold instead of the £5,000 employer threshold, giving £10,458 that the allowance would cover.

📋 Objective: 2.6 (National insurance contributions for employed and self-employed persons)

✅ Correct answer: £205,650

📌 Explanation: Indexation allowance for companies runs only to December 2017 and is computed on each item of expenditure from the month it was incurred: £200,000 × 0.283 = £56,600 and £50,000 × 0.155 = £7,750, a total of £64,350. The gain is £520,000 − £250,000 − £64,350 = £205,650.

❌ Why the other options are wrong: £270,000 gives no indexation allowance, which companies still receive to December 2017; £199,250 applies the 2008 factor to the extension as well; £213,400 indexes the original cost but forgets the indexation on the 2012 extension.

📋 Objective: 5.3 (Chargeable gains for companies)

✅ Correct answer: £252

📌 Explanation: Ifeoma can transfer a fixed 10% of the personal allowance, £1,260, to a spouse who is not a higher or additional rate taxpayer. The transfer works as a tax reducer at the basic rate: £1,260 × 20% = £252 off Chidi's income tax liability.

❌ Why the other options are wrong: £1,260 is the amount of allowance transferred, not the tax saved; £504 gives relief at 40%, but the recipient must be a basic rate taxpayer and relief is at 20%; £2,514 treats the whole personal allowance as transferable.

📋 Objective: 2.5 (The comprehensive income tax computation)

✅ Correct answer: Omitting cash sales from returns; Claiming a fictitious supplier invoice

📌 Explanation: Tax evasion is illegal: it means deliberately misleading HMRC, for example by suppressing income (omitting cash sales) or by claiming expenses that were never incurred (a fictitious invoice). Tax avoidance uses the law to reduce tax and is legal, subject to the general anti-abuse rule.

❌ Why the other options are wrong: Paying dividends instead of salary is ordinary tax planning that uses different tax and NIC rules; transferring shares to his wife uses the no gain no loss rule and her allowances; contributing to a pension scheme is a relief that the legislation intends to give.

📋 Objective: 1.2 (Principal sources of revenue law and practice)

✅ Correct answer: £40,000

📌 Explanation: The 90% holding meets the 75% test, but the companies were in a group only for the corresponding period from 1 October 2025 to 31 March 2026. The loss is time-apportioned: £80,000 × 6/12 = £40,000, and Ettaka's profits for the same six months, £150,000, are enough to absorb it, so the maximum claim is £40,000.

❌ Why the other options are wrong: £80,000 ignores the corresponding period rule for a company joining the group; £72,000 wrongly restricts the loss to the 90% shareholding; £36,000 applies both the time apportionment and the shareholding percentage, but only time apportionment applies.

📋 Objective: 5.5 (The effect of a group corporate structure)

✅ Correct answer: £20,000

📌 Explanation: Total contributions are £95,000 + £10,000 = £105,000, which exceeds the £60,000 annual allowance by £45,000. Unused allowance from the previous three tax years can be brought forward, earliest year first, if he was a scheme member: £20,000 + £5,000 = £25,000. The excess charged at his marginal rate is £45,000 − £25,000 = £20,000.

❌ Why the other options are wrong: £45,000 forgets to bring forward the unused allowance of earlier years; £10,000 leaves out the employer's contribution, which counts towards the annual allowance; £40,000 brings forward only one earlier year instead of three.

📋 Objective: 2.7 (Exemptions and reliefs to defer and minimise income tax)

✅ Correct answer: It can recover its input VAT; It may seek exemption from registration

📌 Explanation: Zero-rated supplies are taxable supplies at 0%. A trader making them counts them towards the £90,000 registration threshold and, once registered, recovers its input VAT. Because its output VAT would be nil, a trader making only zero-rated supplies can ask HMRC for exemption from registration.

❌ Why the other options are wrong: Charging 5% confuses zero rating with the reduced rate; saying its sales fall outside taxable turnover treats zero-rated sales as if they were exempt; being barred from registration describes a trader making only exempt supplies, not zero-rated ones.

📋 Objective: 6.2 (The computation of VAT liabilities)

✅ Correct answer: £8,500

📌 Explanation: Disposals are matched first with same-day acquisitions, then with acquisitions in the following 30 days, then with the share pool. The 1,000 shares bought on 20 December 2025 are matched first: £7,000 − £6,500 = £500. The other 2,000 come from the pool at £24,000 × 2,000/8,000 = £6,000: £14,000 − £6,000 = £8,000. The total gain is £8,500.

❌ Why the other options are wrong: £12,000 matches all 3,000 shares with the pool and ignores the 30-day rule; £10,833 adds the later purchase to the pool before matching; £8,000 counts only the gain on the pool shares and forgets the £500 on the shares matched under the 30-day rule.

📋 Objective: 3.4 (Disposals of shares and securities)

✅ Correct answer: £3,500

📌 Explanation: Companies tax interest on the accruals basis, so the credit is £7,500. Interest on a loan to buy a let property is a non-trading debit (£4,000), giving a net non-trading credit of £3,500. Interest on debentures issued for trade purposes is a trading debit, deducted in computing trading profit instead.

❌ Why the other options are wrong: £2,000 uses the interest received rather than the amount accrued; £7,500 ignores the non-trading debit on the property loan; £11,500 adds the property loan interest as if it were income instead of deducting it.

📋 Objective: 5.2 (Taxable total profits)

✅ Correct answer: £4,000

📌 Explanation: The tea set is a non-wasting chattel sold for more than £6,000, so it is chargeable, but the gain is capped at 5/3 × (proceeds − £6,000). The actual gain is £8,400 − £3,100 = £5,300; the cap is 5/3 × (£8,400 − £6,000) = £4,000. The lower figure, £4,000, is chargeable.

❌ Why the other options are wrong: £5,300 is the actual gain before the 5/3 cap; £2,400 is the excess of the proceeds over £6,000 without the 5/3 multiple; A nil gain treats the chattel as exempt because it cost less than £6,000, but exemption needs the proceeds to be £6,000 or less.

📋 Objective: 3.3 (Disposals of movable and immovable property)

✅ Correct answer: £3,500

📌 Explanation: Where a chattel that cost more than £6,000 is sold for less than £6,000, the loss is restricted by deeming the proceeds to be £6,000. The allowable loss is £9,500 − £6,000 = £3,500.

❌ Why the other options are wrong: £5,500 uses the actual proceeds of £4,000, which the chattel rules replace with £6,000; A nil loss treats the painting as an exempt asset, but the cost exceeded £6,000 so a restricted loss is allowed; £2,000 is only the shortfall of the proceeds below £6,000.

📋 Objective: 3.3 (Disposals of movable and immovable property)

✅ Correct answer: £95,000

📌 Explanation: The gain is £480,000 − £210,000 = £270,000. Exempt months are 48 months of occupation to June 2016, 36 months employed elsewhere in the UK (deemed occupation of up to four years because she lived in the house before and after), 12 months of occupation to June 2020 and the final 9 months: 105 of 162 months. The chargeable gain is £270,000 × 57/162 = £95,000. Letting relief is not available because she did not share occupation.

❌ Why the other options are wrong: £155,000 ignores the deemed occupation for employment elsewhere in the UK; £110,000 forgets that the final 9 months of ownership are always exempt; £55,000 deducts £40,000 of letting relief, which needs shared occupation with the tenants.

📋 Objective: 3.3 (Disposals of movable and immovable property)

✅ Correct answer: £20,370

📌 Explanation: Net gains are £95,000 + £4,000 − £3,500 = £95,500. Less the £6,000 loss brought forward and the £3,000 annual exempt amount, taxable gains are £86,500. Her unused basic rate band is £37,700 − £31,200 = £6,500 at 18% = £1,170; the remaining £80,000 at 24% = £19,200. The liability is £20,370.

❌ Why the other options are wrong: £20,760 taxes all the gains at 24% and ignores the unused basic rate band; £21,090 forgets the annual exempt amount; £15,570 taxes all the gains at 18%, although most of them fall above the basic rate band.

📋 Objective: 3.5 (The computation of capital gains tax)

✅ Correct answer: £780

📌 Explanation: A gift between spouses living together is at no gain, no loss, so Sibusiso would take Lindiwe's cost of £3,100 and realise the same £4,000 gain after the 5/3 cap. Lindiwe would save £4,000 × 24% = £960. Sibusiso's £3,000 annual exempt amount covers £3,000 of the gain and, as a basic rate taxpayer, he pays 18% on the other £1,000 = £180. The net saving is £960 − £180 = £780.

❌ Why the other options are wrong: £960 forgets that the gain is £1,000 more than Sibusiso's annual exempt amount, so he pays some tax; £240 ignores his annual exempt amount and saves only the 6% rate difference on the whole gain; £720 measures Lindiwe's saving at 18%, although her gains are taxed at 24% at the margin.

📋 Objective: 3.6 (Exemptions and reliefs to defer and minimise CGT)

✅ Correct answer: £257,000

📌 Explanation: The annual exemption for 2019/20 of £3,000 is available. The 2018/19 annual exemption cannot be carried forward because it was already used against the gift to the trust in July 2018. The potentially exempt transfer is £260,000 − £3,000 = £257,000.

❌ Why the other options are wrong: £254,000 also deducts the 2018/19 annual exemption, which was used by the gift to the trust; £260,000 deducts no exemption at all; £259,750 deducts the £250 small gifts exemption, which cannot apply to a gift of more than £250.

📋 Objective: 4.3 (Exemptions to defer and minimise IHT)

✅ Correct answer: £17,920

📌 Explanation: The chargeable lifetime transfer of £180,000 in the seven years before 15 March 2020 reduces the nil rate band available to the PET to £325,000 − £180,000 = £145,000. Tax is (£257,000 − £145,000) × 40% = £44,800. The gift was made 5 to 6 years before death, so taper relief of 60% applies and £44,800 × 40% = £17,920 is payable.

❌ Why the other options are wrong: £44,800 forgets taper relief; £26,880 uses 40% taper relief, which applies to gifts made 4 to 5 years before death; A nil liability ignores the 2018 gift to the trust, which is more than seven years before death but still within the seven years before the PET.

📋 Objective: 4.1 (Basic principles of computing transfers of value)

✅ Correct answer: £81,500

📌 Explanation: A grandparent's marriage exemption is £2,500. The 2022/23 annual exemption of £3,000 is used and, because Olufemi made no gifts in 2021/22, that year's £3,000 is carried forward. The potentially exempt transfer is £90,000 − £2,500 − £3,000 − £3,000 = £81,500.

❌ Why the other options are wrong: £79,000 uses the £5,000 marriage exemption that applies to a gift from a parent; £84,500 forgets to bring forward the unused 2021/22 annual exemption; £87,500 deducts only the marriage exemption.

📋 Objective: 4.3 (Exemptions to defer and minimise IHT)

✅ Correct answer: £174,000

📌 Explanation: The potentially exempt transfers made in the seven years before death (£257,000 + £81,500 = £338,500) exceed £325,000, so no nil rate band is left for the estate. The 2018 trust gift is more than seven years before death, so it is ignored for the estate. The home passes to direct descendants, so the residence nil rate band of £175,000 applies: (£610,000 − £175,000) × 40% = £174,000.

❌ Why the other options are wrong: £244,000 ignores the residence nil rate band; £44,000 also gives the estate a full nil rate band that the lifetime gifts have used; £76,600 reduces the nil rate band only by the 2023 gift and forgets the 2020 gift.

📋 Objective: 4.2 (Liabilities on chargeable lifetime transfers and on death)

✅ Correct answer: Dayo, by 31 May 2026

📌 Explanation: Inheritance tax on a potentially exempt transfer that becomes chargeable on death is paid by the donee, here Dayo. It is due six months after the end of the month of death: Olufemi died on 14 November 2025, so the tax is due by 31 May 2026.

❌ Why the other options are wrong: The executors pay the tax on the death estate, not on lifetime gifts; 30 April 2026 applies the due date for lifetime tax on a chargeable lifetime transfer; 14 May 2026 counts six months from the date of death instead of from the end of that month.

📋 Objective: 4.4 (Payment of inheritance tax)

✅ Correct answer: 10 February 2026

📌 Explanation: Under the future test, a business must register if at any time it expects its taxable supplies in the next 30 days alone to exceed £90,000. Registration takes effect from the start of that 30-day period, 10 February 2026, and HMRC must be notified by the end of the period.

❌ Why the other options are wrong: 11 March 2026 is the end of the 30-day period, which is the notification deadline rather than the registration date; 1 April 2026 wrongly applies the historic test timetable; 12 March 2026 wrongly starts registration on the day after the 30-day period ends.

📋 Objective: 6.1 (The VAT registration requirements)

✅ Correct answer: £1,640

📌 Explanation: Input VAT on goods bought in the four years before registration and still held is recoverable: the machine (£4,800 × 1/6 = £800) and the parts still held (£3,600 × 1/6 = £600). Input VAT on services supplied in the six months before registration is recoverable: the accountancy fees (£1,440 × 1/6 = £240). The total is £1,640.

❌ Why the other options are wrong: £1,840 also recovers VAT on the July 2025 advertising, a service supplied more than six months before registration; £2,040 recovers VAT on all the spare parts, including those already used before registration; £1,968 applies 20% to VAT-inclusive amounts instead of the 1/6 fraction.

📋 Objective: 6.1 (The VAT registration requirements)

✅ Correct answer: 26 February 2026

📌 Explanation: The basic tax point for services is the date they are performed, 26 February 2026. An invoice replaces the basic tax point only if it is issued within 14 days, and the invoice here came 22 days later. No payment was received before the basic tax point, so the tax point stays at 26 February 2026.

❌ Why the other options are wrong: 20 March 2026 treats the invoice as the tax point although it was issued more than 14 days after the work; 31 March 2026 uses the payment date, which matters only when payment comes first; 12 March 2026 is simply 14 days after completion and is not a tax point.

📋 Objective: 6.2 (The computation of VAT liabilities)

✅ Correct answer: £2,700

📌 Explanation: Input VAT is recoverable on the spare parts (£12,000 × 20% = £2,400) and the staff training course (£1,500 × 20% = £300), a total of £2,700. Input VAT on a car available for private use and on entertaining people who are not employees is blocked.

❌ Why the other options are wrong: £6,300 recovers the blocked VAT on a car that Hamza uses privately; £2,800 recovers the blocked VAT on entertaining the operator's managers; £2,400 wrongly blocks the VAT on staff training, which is a business cost.

📋 Objective: 6.2 (The computation of VAT liabilities)

✅ Correct answer: 7 May 2026

📌 Explanation: VAT returns are submitted online through Making Tax Digital compatible software, and both the return and the VAT due must reach HMRC within one month and seven days of the end of the VAT period. For the period ending 31 March 2026 the deadline is 7 May 2026.

❌ Why the other options are wrong: 30 April 2026 leaves out the extra seven days; 31 May 2026 allows two months instead of one month and seven days; 31 March 2027 confuses the return deadline with the annual accounting scheme or a corporation tax filing date.

📋 Objective: 6.2 (The computation of VAT liabilities)

Sanyu's taxable supplies for the 12 months to 30 June 2025 are £90,000 (6 × £6,000 + 6 × £9,000). This only equals the threshold and does not exceed it, so she was not yet liable to register.

For the 12 months to 31 July 2025 her taxable supplies are £93,000 (5 × £6,000 + 7 × £9,000), so the threshold was first exceeded at the end of July 2025.

She should have notified HMRC within 30 days, by 30 August 2025, and she should have been registered from 1 September 2025. The future test did not apply because her sales in any 30-day period were far below £90,000.

📋 Objective: 6.1 (The VAT registration requirements)

Sales from 1 September 2025 to 31 March 2026 are 7 × £9,000 = £63,000. Because Sanyu cannot recover VAT from her customers, these sales are treated as VAT-inclusive: output VAT £63,000 × 1/6 = £10,500.

Input VAT on hair products £2,100 × 1/6 = £350.

VAT payable for the period: £10,500 − £350 = £10,150.

📋 Objective: 6.2 (The computation of VAT liabilities)

The penalty is based on the potential lost revenue, which is the VAT of £10,150 for the period. For a careless (non-deliberate) failure the maximum is 30% × £10,150 = £3,045.

Sanyu told HMRC before HMRC contacted her, so this is an unprompted disclosure. The penalty is reduced for the quality of her disclosure and, as she disclosed within 12 months of the tax first becoming unpaid, it can be reduced to nil.

📋 Objective: 1.6 (Penalties for non-compliance)

Normal accounting: output VAT £108,000 × 20% = £21,600 less input VAT £1,400 = £20,200 a year.

Flat rate scheme: her VAT-inclusive turnover is £108,000 × 1.2 = £129,600. Her goods cost £3,600, which is more than 2% of £129,600 (£2,592) and more than £1,000, so she is not a limited cost trader and uses the 13% hairdressing rate: £129,600 × 13% = £16,848.

She is eligible because her expected VAT-exclusive turnover of £108,000 is below £150,000. Joining the flat rate scheme would save £20,200 − £16,848 = £3,352 a year, so she should join.

📋 Objective: 6.3 (The VAT special schemes)

Nnyonyi Cold Chain Logistics Ltd — tax-adjusted trading profit, year ended 31 March 2026

• Operating profit £298,320
• Depreciation, added back £64,300
• Legal fees on buying the freehold cold store, capital and added back £3,400
• Legal fees on renewing a short lease, allowable 0
• Entertaining customers, disallowed and added back £2,900
• Staff Christmas party, allowable 0
• Gift aid donation, added back (relieved as a qualifying charitable donation) £2,000
• Interest on the loan to buy the cold store, a trading loan relationship debit, allowable 0
• Car leasing: 15% × £6,000 = £900 disallowed because CO2 emissions exceed 50 grams per kilometre
• Bank interest receivable, deducted (taxed as non-trading loan relationship income) £1,600
• Dividends, deducted (not taxable) £9,000; non-trading income deducted in total £10,600
• Adjusted profit before capital allowances £361,220
• Less capital allowances (working) £266,220
• Tax-adjusted trading profit £95,000

Working — capital allowances: the new refrigerated trailers qualify for full expensing (a 100% first year allowance for new main pool plant bought by a company): £145,000. The second-hand forklift truck does not qualify for full expensing, and the cold-room system is special rate expenditure, so both receive the annual investment allowance: £22,000 + £60,000 = £82,000. The new zero-emission car receives a 100% first year allowance of £34,000, with no private use restriction for a company. Main pool: £38,000 − lorry proceeds £9,000 = £29,000; writing down allowance at 18% = £5,220. Total capital allowances: £145,000 + £82,000 + £34,000 + £5,220 = £266,220.

📋 Objective: 5.2 (Taxable total profits)

Taxable total profits: trading profit £95,000 + interest income £1,600 − qualifying charitable donation £2,000 = £94,600.

Augmented profits: £94,600 + dividends £9,000 = £103,600.

Ekibira Holdings (Pty) Ltd is an associated company even though it is resident overseas, because it is a trading company under common control. The dormant UK company is ignored. With one associated company the limits are divided by 2: lower limit £25,000 and upper limit £125,000. Augmented profits lie between them, so marginal relief applies.

Corporation tax at the main rate: £94,600 × 25% = £23,650.

Marginal relief: 3/200 × (£125,000 − £103,600) × £94,600/£103,600 = £293.11 (£293 rounded).

Corporation tax liability: £23,650 − £293.11 = £23,356.89 (£23,357 rounded).

📋 Objective: 5.4 (The comprehensive corporation tax computation)

A 50% first year allowance would give relief of only £30,000 in the year ended 31 March 2026. The remaining £30,000 would go into the special rate pool and be relieved slowly at 6% a year, only £1,800 in the next year.

The annual investment allowance gives 100% relief on the whole £60,000 now, and the company's £1,000,000 limit is far from used, so claiming it accelerates the tax relief.

📋 Objective: 5.6 (Exemptions and reliefs to defer and minimise corporation tax)

Car benefit percentage: CO2 113 grams rounded down to 110; 17% + (110 − 55)/5 = 28%, plus the 4% diesel supplement = 32%.

The capital contribution of £3,000 reduces the list price: (£42,600 − £3,000) × 32% = £12,672 for a full year.

The car was available for 8 months (6 August 2025 to 5 April 2026): £12,672 × 8/12 = £8,448, less her payments for private use of 8 × £100 = £800, giving a car benefit of £7,648.

Fuel benefit: £28,200 × 32% × 8/12 = £6,016. Her £50 a month is only a partial reimbursement of private fuel, so there is no reduction in the fuel benefit.

📋 Objective: 2.2 (Income from employment)

Folasade Ogunleye — income tax computation 2025/26

• Salary £84,000
• Bonus paid 30 May 2025 (receipts basis) £9,000
• Bonus for 2025 paid 30 April 2026, taxable in 2026/27, 0
• Car benefit £7,648
• Fuel benefit £6,016
• Mobile phone, exempt benefit, 0
• Less mileage allowance relief: 6,000 miles × (45p − 30p) = (£900)
• Employment income £105,764
• Bank interest £1,800
• ISA interest, exempt, 0
• Dividends £2,500
• Net income £110,064

Adjusted net income: £110,064 less the gross gift aid donations of £5,000 (£4,000 × 100/80) = £105,064.

Personal allowance: £12,570 − (£105,064 − £100,000)/2 = £12,570 − £2,532 = £10,038.

Taxable income £100,026: non-savings income £95,726, savings £1,800 and dividends £2,500.

The basic rate band is extended by the gross gift aid donations: £37,700 + £5,000 = £42,700.

• Non-savings: £42,700 × 20% = £8,540
• Non-savings: £53,026 × 40% = £21,210.40
• Savings: £500 × 0% (higher rate taxpayer's nil rate band), then £1,300 × 40% = £520
• Dividends: £500 × 0%, then £2,000 × 33.75% = £675
• Income tax liability £30,945.40

📋 Objective: 2.5 (The comprehensive income tax computation)

Class 1 is charged on cash earnings: salary £84,000 + bonus paid in the year £9,000 = £93,000. The mileage allowance of 30p is below the approved rate, so it is not earnings.

Employee's Class 1: (£50,270 − £12,570) × 8% = £3,016 plus (£93,000 − £50,270) × 2% = £854.60, a total of £3,870.60 (£3,871 rounded).

Employer's Class 1: (£93,000 − £5,000) × 15% = £13,200.

Class 1A (employer, on taxable benefits): car £7,648 + fuel £6,016 = £13,664 × 15% = £2,049.60 (£2,050 rounded). The mobile phone is exempt.

📋 Objective: 2.6 (National insurance contributions for employed and self-employed persons)