Employment Income and PAYE
Employment income, benefits, expenses, termination payments, PAYE and employee reporting.
How to study the ATT Qualification
Use Finance Act 2025 for the 2026 tax papers, complete the three foundational CBEs early, apply professional ethics throughout and concentrate option practice on the one paper you will enter.
Core concepts
Concept 1
Employment receipts and benefits require classification, valuation and exemption analysis.
Exam cue: Identify employee, employer, payment or benefit, date and tax treatment.
Concept 2
PAYE translates taxable pay into withholding and reporting obligations.
Exam cue: Separate taxable value from payroll withholding and reporting.
Concept 3
Termination and restrictive-covenant payments have specific tax treatment.
Exam cue: Explain corrections, deadlines and penalties where payroll treatment is wrong.
Risk pitfalls and guardrails
Treating reimbursement as automatically exempt.
Guardrail: Do not use an obsolete tax rate, assume a relief, ignore legal form, submit unsupported information or omit the relevant deadline and ethical response.
Confusing the tax charge with the PAYE collection mechanism.
Guardrail: Do not use an obsolete tax rate, assume a relief, ignore legal form, submit unsupported information or omit the relevant deadline and ethical response.
Ignoring employer reporting duties.
Guardrail: Do not use an obsolete tax rate, assume a relief, ignore legal form, submit unsupported information or omit the relevant deadline and ethical response.
Memory anchors
Employment receipt
Classify cash, benefit, expense reimbursement or termination amount.
PAYE
Withhold and report employment taxes through the payroll system.
Benefit value
Apply the statutory valuation and deduct qualifying employee contributions.
Termination
Split contractual, exempt and taxable elements under current rules.
Correction
Fix payroll and reporting using the appropriate period and process.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
An employee earns £3,500 a month and has a cumulative tax code giving £1,047.50 monthly free pay at the relevant point. If all taxable pay above free pay is charged at 20%, what PAYE is deducted for the month?
An employee receives a £4,000 cash bonus through payroll. Which treatment is normally required?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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