Christmas bonus / gift to employees

By Tolley in association with Philip Rutherford
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The following Employment Tax guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Christmas bonus / gift to employees
  • Introduction
  • Cash bonus
  • Gifts
  • Trivial benefits
  • PAYE settlement agreement (PSA)
  • Reporting requirements

Introduction

Many employers provide employees either with a Christmas bonus or festive gift. Depending on the nature of the award there are varying tax, NIC and reporting requirements. Rather than there being specific legislation regarding Christmas bonuses or gifts, you should consider the underlying nature of the gift and the tax treatment of that item.

Cash bonus

If an employer provides an employee with a cash bonus then the full amount is taxable. It should be treated as earnings under ITEPA 2003, s 62.

If something is readily convertible into cash then it is treated as cash for tax purposes, eg vouchers which can be readily converted are treated as cash. Cash vouchers, taxable under ITEPA 2003, s 81, are covered in the Vouchers guidance note.

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