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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: income from employment

Priya is employed by Kestrel Ltd and is resident in the UK throughout 2025/26. On 3 April 2026 (after the end of the tax year) Kestrel Ltd paid her a bonus of £12,000, which she had become entitled to on 28 March 2026. Under the employment income receipts basis, in which tax year is the bonus taxable?

The bonus is taxable in 2025/26. Under the receipts basis, general earnings are taxed when received, which is the earlier of payment and becoming entitled to payment. Priya was entitled on 28 March 2026, before the 5 April year end, so the later payment date is irrelevant.

  1. A2025/26, because she became entitled to the bonus on 28 March 2026 and entitlement was before the year endCorrect
  2. B2026/27, because payment on 3 April 2026 was after the year end and entitlement was earlier
  3. C2025/26, because the bonus relates to work done in 2025/26
  4. D2026/27, because the bonus was paid before the company's accounting date

Explanation

For general earnings, the receipts basis taxes the earlier of receipt (payment, or entitlement to payment) and, for a director, other specified events. Priya, a non-director, became entitled on 28 March 2026, which is earlier than payment on 3 April 2026. The bonus is therefore taxable in 2025/26. Option 2 wrongly uses the later payment date.

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