Expenses and benefits: Christmas bonuses
Printable version
1. Overview
As an employer providing Christmas bonuses to your employees, you have certain tax, National Insurance and reporting obligations.
This depends on:
- whether you give cash bonuses or goods (gifts) to an employee
- if you give goods to an employee, whether or not they can be resold for cash
2. What to report and pay
You may have to report any Christmas bonuses to HM Revenue and Customs (HMRC), and deduct and pay tax and National Insurance on them.
Cash bonus
Any cash you give to employees as a Christmas bonus counts as earnings, so you’ll need to:
- add the value to your employee’s other earnings
- deduct and pay Pay As You Earn (PAYE) tax and Class 1 National Insurance through payroll
Goods
If you give goods as Christmas gifts, and they can’t be counted as trivial benefits, you must:
- report on form P11D
- pay Class 1A National Insurance on the value of the benefit
3. Work out the value
The amount you need to report depends on the type of bonus you provide.
Cash bonuses
Use the amount you pay to the employee.
Goods with no resale value
Use the amount the goods cost you.
Goods with cash resale value
Use whichever is the higher of:
- the resale value
- the amount the goods cost you
4. Technical guidance
The following guides contain more detailed information: