ATT Personal Tax Paper 1 Exam 2026 –
Association of Taxation Technicians (ATT)
Personal Taxation Paper 1 Practice Exam 2026
| Practice Questions & Study Guide |
Complete Exam-Style Questions with Correct
Detailed Answers & Rationales (Reliable
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Question 1
For UK income tax purposes, which of the following is generally
treated as non-savings income?
A. Bank interest
B. Dividends from UK companies
C. Employment salary
D. Interest from a government bond
Answer: C. Employment salary
Salary from employment is non-savings income. Savings income
generally includes interest and similar returns from investments,
while dividends are taxed under the separate dividend income
,regime. The distinction is important because the ordering rules
for income tax generally apply the personal allowance first and
then tax the different categories of income in a prescribed
order.
Question 2
An employee receives a cash salary of £48,000 and has no other
income. Ignoring employee National Insurance contributions,
what is the employee's taxable income if the personal
allowance is £12,570?
A. £35,430
B. £48,000
C. £60,570
D. £12,570
Answer: A. £35,430
Taxable income is calculated by deducting the available
personal allowance from total taxable income. Therefore,
£48,000 − £12,570 = £35,430. The personal allowance is not
itself a tax credit; it reduces the amount of income on which
income tax is charged.
Question 3
,Which statement best describes the UK personal allowance?
A. It is deducted from tax payable
B. It is generally deducted from taxable income before income
tax is calculated
C. It is available only to employees
D. It applies only to savings income
Answer: B. It is generally deducted from taxable income
before income tax is calculated
The personal allowance normally shelters the first portion of an
individual's income from income tax. It is therefore an income
deduction rather than a reduction of the final tax bill. It is
generally available regardless of whether income arises from
employment, self-employment, property or investments, subject
to the relevant rules and restrictions.
Question 4
An individual has employment income of £30,000 and bank
interest of £2,000. Assuming a full personal allowance is
available, which income is considered first when applying the
basic-rate band?
A. Savings income only
B. Dividend income only
, C. Non-savings income
D. Savings income before non-savings income
Answer: C. Non-savings income
The income tax ordering rules generally place non-savings
income first, followed by savings income and then dividend
income. This ordering can affect whether savings income is
taxed at the basic, higher or additional rate and whether a
taxpayer is entitled to a personal savings allowance.
Question 5
Which of the following is normally a condition for an expense
incurred by an employee to qualify for income tax relief?
A. It must be personally beneficial to the employee
B. It must be incurred wholly, exclusively and necessarily in the
performance of the duties of the employment
C. It must be approved by the employee's colleague
D. It must be paid directly by the employer
Answer: B. It must be incurred wholly, exclusively and
necessarily in the performance of the duties of the
employment
Employee expense deductions are subject to strict statutory
conditions. The expense generally must be incurred wholly,
Association of Taxation Technicians (ATT)
Personal Taxation Paper 1 Practice Exam 2026
| Practice Questions & Study Guide |
Complete Exam-Style Questions with Correct
Detailed Answers & Rationales (Reliable
Answers) | Latest Updated Version | Instant
Download PDF
Question 1
For UK income tax purposes, which of the following is generally
treated as non-savings income?
A. Bank interest
B. Dividends from UK companies
C. Employment salary
D. Interest from a government bond
Answer: C. Employment salary
Salary from employment is non-savings income. Savings income
generally includes interest and similar returns from investments,
while dividends are taxed under the separate dividend income
,regime. The distinction is important because the ordering rules
for income tax generally apply the personal allowance first and
then tax the different categories of income in a prescribed
order.
Question 2
An employee receives a cash salary of £48,000 and has no other
income. Ignoring employee National Insurance contributions,
what is the employee's taxable income if the personal
allowance is £12,570?
A. £35,430
B. £48,000
C. £60,570
D. £12,570
Answer: A. £35,430
Taxable income is calculated by deducting the available
personal allowance from total taxable income. Therefore,
£48,000 − £12,570 = £35,430. The personal allowance is not
itself a tax credit; it reduces the amount of income on which
income tax is charged.
Question 3
,Which statement best describes the UK personal allowance?
A. It is deducted from tax payable
B. It is generally deducted from taxable income before income
tax is calculated
C. It is available only to employees
D. It applies only to savings income
Answer: B. It is generally deducted from taxable income
before income tax is calculated
The personal allowance normally shelters the first portion of an
individual's income from income tax. It is therefore an income
deduction rather than a reduction of the final tax bill. It is
generally available regardless of whether income arises from
employment, self-employment, property or investments, subject
to the relevant rules and restrictions.
Question 4
An individual has employment income of £30,000 and bank
interest of £2,000. Assuming a full personal allowance is
available, which income is considered first when applying the
basic-rate band?
A. Savings income only
B. Dividend income only
, C. Non-savings income
D. Savings income before non-savings income
Answer: C. Non-savings income
The income tax ordering rules generally place non-savings
income first, followed by savings income and then dividend
income. This ordering can affect whether savings income is
taxed at the basic, higher or additional rate and whether a
taxpayer is entitled to a personal savings allowance.
Question 5
Which of the following is normally a condition for an expense
incurred by an employee to qualify for income tax relief?
A. It must be personally beneficial to the employee
B. It must be incurred wholly, exclusively and necessarily in the
performance of the duties of the employment
C. It must be approved by the employee's colleague
D. It must be paid directly by the employer
Answer: B. It must be incurred wholly, exclusively and
necessarily in the performance of the duties of the
employment
Employee expense deductions are subject to strict statutory
conditions. The expense generally must be incurred wholly,
