ACCA Applied Skills · Taxation (UK) · Income from employment
Marcus is employed by Orwell Ltd throughout the 2025–26 tax year. He is paid a basic salary of £30,000 and a bonus of £6,000. The bonus was awarded on 20 March 2026 but, under his contract, it was not paid or made payable until 10 May 2026. Marcus had no right to the bonus earlier and he did not control Orwell Ltd. He also received £800 of taxable benefits and paid £1,500 of subscriptions to a professional body that is not on HMRC's approved list. What are Marcus's taxable earnings from employment for 2025–26?
Marcus's taxable earnings are £30,800. The bonus is taxed when it is paid or when he becomes entitled to it, whichever is earlier, and that is in 2026–27, so it is excluded. The subscription is not deductible because the body is not approved, so salary plus benefits is taxable.
- A£30,800Correct
- B£36,800
- C£29,300
- D£35,300
Explanation
A bonus is taxed at the earlier of the date it is paid and the date the employee becomes entitled to it. Here both are in 2026–27, so the £6,000 is excluded. Taxable earnings are therefore £30,000 + £800 = £30,800. Subscriptions to a body not on the approved list are not deductible. The distractor of £36,800 wrongly taxes the bonus on the award date.
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