R03 Employee benefits: free practice questions

1. Question 1 of 5

   On what amount is an employee generally taxed when an employer provides a benefit?

   Option A: The second-hand value of the benefit at the end of the yearOption B: A flat 20% of the employee's salaryOption C: The cost to the employer, less any employee contributionOption D: The retail price the public would pay

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   The answer is C: The cost to the employer, less any employee contribution

   Employees are taxed on the cash equivalent of a benefit, broadly the cost to the employer of providing it, reduced by anything the employee contributes. Specific rules override this for items such as cars and fuel.

   Why the other options are wrong

   A

   The cash equivalent isn't based on what the item could be sold for.

   B

   There's no salary-based charge for benefits.

   D

   The measure is the employer's cost, not the retail price.

2. Question 2 of 5

   A hybrid company car emits 35 g/km of CO2 and has an electric range of 75 miles. What percentage of list price is taxed for 2026/27?

   Option A: 4%Option B: 7%Option C: 17%Option D: 10%

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   The answer is B: 7%

   For hybrids emitting 1–50 g/km, the electric range sets the rate: 130+ miles 4%, 70–129 miles 7%, 40–69 miles 10%, 30–39 miles 14% and under 30 miles 16%.

   Why the other options are wrong

   A

   4% applies to an electric range of 130 miles or more, or zero-emission cars.

   C

   17% applies to cars emitting 51 to 54 g/km.

   D

   10% applies to an electric range of 40 to 69 miles.

3. Question 3 of 5

   Ella drives her own car 14,000 business miles in 2026/27. What is the most her employer can pay her tax-free in mileage allowance?

   Option A: £5,500Option B: £3,500Option C: £7,700Option D: £6,500

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   The answer is D: £6,500

   Income tax approved rates are 55p a mile for the first 10,000 business miles and 25p after that: (10,000 × £0.55) + (4,000 × £0.25) = £5,500 + £1,000 = £6,500.

   Why the other options are wrong

   A

   Miles over 10,000 also qualify, at 25p.

   B

   The first 10,000 miles qualify at 55p.

   C

   Only the first 10,000 miles qualify for 55p; after that the rate is 25p.

4. Question 4 of 5

   When is an employee taxed on private spending with a company credit card?

   Option A: When the card is usedOption B: Only if the spending exceeds £50 a monthOption C: When the employer pays the card billOption D: At the end of the tax year on the total

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   The answer is A: When the card is used

   A credit token gives rise to a benefit equal to the employer's cost, taxed when the employee uses it. A deduction can be claimed for business use.

   Why the other options are wrong

   B

   There's no monthly de minimis.

   C

   The timing is when the card is used, not when the bill is settled.

   D

   Each use gives rise to the benefit at the time.

5. Question 5 of 5

   How much of an employee's qualifying relocation expenses can an employer reimburse tax-free?

   Option A: £5,000Option B: £8,000Option C: £10,000Option D: No limit

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   The answer is B: £8,000

   Qualifying relocation and removal expenses are tax-free up to £8,000. Any excess is taxable.

   Why the other options are wrong

   A

   £5,000 is the suggestion scheme limit.

   C

   £10,000 is the beneficial loan threshold.

   D

   There's a cap; anything over it is taxable.

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