In this section:

  • Expenses and benefits A to Z

Bonuses

This guide explains your tax and National Insurance contributions (NICs) obligations if you give a cash or other bonus to an employee – for example, for reaching a performance target.

On this page:

Cash bonuses (including vouchers exchangeable for cash)

Definitions or restrictions

You give the employee cash, or vouchers they can exchange for cash.

What to report, what to pay

The bonus payment counts as earnings, so:

  • add it to your employee's other earnings
  • deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

Work out the value to use

The value to use is:

  • the amount of cash you give to the employee
  • in the case of vouchers, the amount of cash the employee can exchange them for

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Non-cash bonuses

Definitions or restrictions

You give the employee anything other than cash or vouchers exchangeable for cash.

What to report, what to pay

Check the A to Z for the tax and NICs rules applying to the specific item(s) that you’ve provided to your employee.

In many cases this will involve reporting on form P9D or P11D and paying Class 1A NICs where appropriate. However, in certain special cases you must operate PAYE when you make a non-cash bonus or other payment to an employee. The circumstances in which this applies include if you provide an employee with a readily convertible asset. For more information, see the ‘Technical guidance’ section below.

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Technical guidance

EIM11803: PAYE income in non-monetary form

Definition of ‘readily convertible asset’

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