Employment Tax

Christmas bonus / gift to employees

Produced by Tolley
  • 21 Feb 2022 11:43

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Christmas bonus / gift to employees
  • Introduction
  • Cash bonus
  • Gifts
  • Goods with no resale value
  • Goods with resale value
  • Trivial benefits
  • PAYE settlement agreement (PSA)
  • Reporting requirements

Christmas bonus / gift to employees

Introduction

Employers may 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.

Similarly, if third parties provide cash gifts to employees, and it is customary for them to do so, those amounts should also be included as earnings and subject to income tax and Class 1 NIC under PAYE. If the payment does not

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