Christmas bonuses

Our experts tell you everything you need to know about giving your staff bonuses at Christmas

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

How do HMRC treat Christmas bonuses?

If you are a generous employer and you give your employees a bonus at Christmas, you will need to report this to HMRC and you might have additional tax and National Insurance obligation as well. This will depend on the bonus you gave to your employees – whether the bonus was cash or gifts. If the bonus consisted of gifts, it will depend on whether these can be resold for cash.

  • Cash bonuses: these will count as earnings as far as HMRC is concerned, so you will need to add the value of the bonus to the employee’s other earnings and then deduct PAYE tax and Class 1 National Insurance through payroll in the same manner as you would for their other earnings.
  • Goods (gifts): if these can’t be counted as trivial benefits, you need to report them on your P11D form and pay Class 1A National Insurance on their value.

HMRC class a gift as a trivial benefit if all of the following conditions apply:

  • It cost £50 or less for you to provide to the employee
  • It isn’t cash or a cash voucher
  • It isn’t a reward for the performance or their work
  • It isn’t in their employment terms or contract.

You don’t need to report trivial benefits to HMRC and they don’t count as far as tax or National Insurance are concerned.

How do you calculate the value of the bonus?

If the bonus was a cash bonus, the value is pretty easy to work out – you would use the amount that you paid to the employee as the Christmas bonus. If the bonus was in the form of a gift and that gift has no resale value (i.e. the employee can’t sell the gift and pocket the cash instead) then you use the amount it cost you to purchase the gift. However, if the gift does have a cash resale value, you need to use either the amount the gift cost you to purchase or the resale value, whichever is the higher value.

How can DSR Tax Claims help?

We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

This page was last updated on 06/11/2018.

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