ExpertMedium2 marksMultiple Choice
ACCA · Question 05 · Income tax and national insurance contributions
An employer provides an employee with a new zero-emission electric company car. The list price is £40,000. The appropriate percentage for zero-emission cars is 2%. What is the Class 1A NIC liability for the employer for the 2023/24 tax year? (Assume the Class 1A rate is 13.8%)
An employer provides an employee with a new zero-emission electric company car. The list price is £40,000. The appropriate percentage for zero-emission cars is 2%. What is the Class 1A NIC liability for the employer for the 2023/24 tax year? (Assume the Class 1A rate is 13.8%)
Answer options:
A.
£110.40
B.
£800.00
C.
£5,520.00
D.
£0.00
How to approach this question
First calculate the taxable benefit (List Price x Appropriate Percentage). Then apply the Class 1A NIC rate (13.8%) to the taxable benefit.
Full Answer
A.£110.40✓ Correct
The taxable benefit for the car is £40,000 x 2% = £800. The employer pays Class 1A NIC on taxable benefits at a rate of 13.8%. Therefore, £800 x 13.8% = £110.40.
Common mistakes
Forgetting to apply the 13.8% rate and just selecting the benefit value.
Practice the full ACCA TX — Taxation Practice Exam 6
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