ACC3140 - Taxation Unit 3 - Employment Income

Flashcards covering key vocabulary and concepts related to taxation and employment income.

Employment Income

Income derived from wages, salaries, bonuses, commissions, termination payments, benefits in kind, pensions, and various allowances such as job seeker’s allowance.

Basis of Assessment

An individual’s employment income for a tax year is the amount received in that year, even if it was earned in a prior period.

Benefits-in-Kind

Non-cash benefits provided to employees, which are taxed based on the cost to the employer for providing the benefit.

Termination Payments

Payments made to employees upon termination, some of which may be exempt from income tax up to £30,000.

National Insurance Contributions (NICs)

Mandatory payments made by employees and employers to fund state benefits, including pensions and sickness benefits.

PAYE System

Pay As You Earn system where employers deduct income tax and NICs from employees' gross pay before payment.

Trivial Benefits

Benefits in kind costing no more than £50 each, which are exempt from both income tax and NICs.

Employee Share Incentive Schemes

Plans allowing employees to acquire shares as a reward, often with tax advantages.

Approved Share Option Schemes

Plans allowing employees to purchase shares at a discounted price without immediate tax liabilities.

High Income Child Benefit Charge (HICBC)

A tax charge that applies to high-income earners, effectively withdrawing child benefit as income increases above £60,000.

Mileage Allowances

Tax-free allowances an employee can receive for using their car for business travel, with specific rates for mileage.

Reimbursed Expenses

Expenses paid back by employers to employees for business purposes which do not affect the employee's tax position.

Pension Contributions

Payments made to an employee's pension plan which can be tax-advantaged under specific circumstances.