Expenses and benefits: bonuses

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1. Overview

As an employer providing bonus payments to your employees, you have certain tax, National Insurance and reporting obligations.

This includes both cash and non-cash bonuses.

2. What to report and pay

What you have to deduct, pay and report to HM Revenue & Customs (HMRC) depends on the kind of bonus you give your employee.

Cash bonuses (including vouchers exchangeable for cash)

The bonus you’ve paid counts as earnings, so:

• add it to your employee’s other earnings
• deduct and pay Pay As You Earn (PAYE) tax and Class 1 National Insurance through payroll

Non-cash bonuses

There are different rules depending on the item you give. Follow the reporting and payment rules for the specific item.

In certain cases you’ll have to use PAYE when giving non-cash bonuses, eg if you give your employee something they can easily convert to cash.

3. Technical guidance

The following guides contain more detailed information:

• PAYE income in non-monetary form

• definition of a ‘readily convertible asset’