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  • Expenses and benefits A to Z

Examination grants

This guide explains your tax and National Insurance contributions (NICs) obligations if you provide cash to an employee in recognition of their success in an examination.

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One-off cash awards for exam success

Definitions or restrictions

You provide a one-off payment to your employee for passing an examination.

What to report, what to pay

Unless all the conditions listed in the ‘Exceptions’ section apply, your payment to the employee 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 your payment to the employee.

Exceptions

You have no reporting requirements and no tax or NICs to pay if all the following conditions apply:

  • the employee earns less than a rate of £8,500 per year
  • the award is discretionary – ie, you’re under no legal obligation to provide it
  • it’s not part of the employee’s duties to pass the exam
  • the award is a one-off lump-sum payment
  • the award is reasonable and there’s no evidence that it represents disguised remuneration

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Salary increases following exam success

Definition or restrictions

You increase an employee’s salary following success in an examination.

What to report, what to pay

The additional salary is no different from the employee’s other earnings, so:

  • deduct and pay PAYE tax and Class1 NICs using your usual payroll procedures

Work out the value

The value to use is the full amount of the employee’s salary, including the post-exam increase.

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Technical guidance

EIM01100: Examination grants to employees

NIM02105: Class 1 NICs - course fees and examination rewards

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