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ACCATX Walkthrough: Employment Income, Benefits in Kind and Income Tax
A fully worked ACCA TX personal tax question — computing employment income with benefits in kind, applying tax bands with pension extension, and calculating the final income tax liability.
Employment income questions are in every TX exam. The most marks are dropped on benefits in kind (company car and loan calculations) and on failure to extend the basic rate band for pension contributions. This walkthrough covers a typical 20-mark TX Section C employment income computation.
Priya is employed as a marketing director. Salary: £95,000. She received a company car (list price £36,000, CO₂ emissions 120g/km, appropriate percentage 27%) with free fuel. She was given an interest-free loan of £60,000 on 6 April 20X3 and repaid £20,000 on 6 October 20X3; the official rate of interest is 2.25%. She contributed £8,000 to her employer's registered pension scheme (employee contribution). Calculate Priya's income tax liability for 2024/25.
[20 marks]
Step 1 — Employment Income
| Item | £ |
|---|---|
| Salary | 95,000 |
| Company car benefit (£36,000 × 27%) | 9,720 |
| Car fuel benefit (£27,800 × 27%) | 7,506 |
| Beneficial loan benefit (see Step 2) | 1,013 |
| Total employment income | 113,239 |
Beneficial loan calculation (average method)
Average loan balance = (£60,000 + £40,000) / 2 = £50,000. Taxable benefit = £50,000 × 2.25% = £1,125. Less: interest paid by Priya = £0 (interest-free). Benefit = £1,125. Note: loan > £10,000 so the de minimis exemption does not apply. Result: £1,125 (rounded to £1,013 if using strict daily method — use the simpler average method unless told otherwise).
Step 2 — Adjusted Net Income and Personal Allowance
Check if personal allowance is reduced (ANI > £100,000)
Adjusted Net Income (ANI) = Total income − Gross pension contribution. Gross pension = £8,000 (the employee pays net; if employer scheme, the gross is the same as the amount contributed). ANI = £113,239 − £8,000 = £105,239. PA reduction: (£105,239 − £100,000) / 2 = £2,620. Reduced PA = £12,570 − £2,620 = £9,950.
Step 3 — Tax Computation
| Band | Income (£) | Rate | Tax (£) |
|---|---|---|---|
| Personal allowance | 9,950 | 0% | 0 |
| Basic rate band (extended) | 37,700 + 8,000 = 45,700 | 20% | 9,140 |
| Higher rate band | 113,239 − 9,950 − 45,700 = 57,589 | 40% | 23,036 |
| Total income tax | 32,176 |
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TX employment income questions are structured — learn the template and apply it under timed conditions.
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