CAT / FIA FTX Syllabus C. Income Tax Liabilities - Basis of assessment for employment income - Notes ^{2 / 15}

Emoluments

Emoluments are amounts that an employee will pay income tax and national insurance contributions on. 

They include:

• salary

• bonus

• benefits

Emoluments are taxable on the earlier of 2 dates:

1. When a person becomes entitled to payment of the earnings

2. When payment is made

Example

Peter became entitled to be paid a bonus on 31 January 2025 (Tax year 24/25).

He was actually paid the bonus on 30 April 2025 (Tax year 25/26).

• He should pay income tax on it in the tax year 24/25.

Illustration:

Frank is employed in Cow plc and his annual salary is £36,000. 

On 06/01/25 his annual salary was increased to £42,000.

Note His salary is due for a tax year which runs from 6th April - 5th April and salaries accrue evenly over a tax year. 

His salary has changed in between the tax year. 

Therefore, the salary per month must be calculated and then totalled to give a figure for the entire year.

• Additionally, Frank receives the following bonuses based on the company’s results:

  For the year ending 31/12/2023 £3000. 

  He became entitled to the bonus on 31/12/23 and was paid the bonus on 31/5/24.

  For the year ending 31/12/2024 £10,000. 

  He became entitled to the bonus on 31/12/24 and was paid the bonus on 31/5/25.

• Required:

  Calculate the taxable income in 2024/25.

Solution:

His bonus of £3,000 will be taxed in the tax year 23/24 as he became entitled to it on 31 December 2023.

His bonus of £10,000 will be taxed in the tax year 24/25 as he became entitled to it on 31 December 2024.

Conclusion: