In this section:
- Providing employee expenses and benefits: an overview
- Schemes that reduce expenses and benefits paperwork
- 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.
On this page:
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
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.
Technical guidance
EIM01100: Examination grants to employees
NIM02105: Class 1 NICs - course fees and examination rewards
