Staff have to pay tax on their bonuses

RH writes: I refer to an earlier letter on Christmas gifts for staff. You stated that bonuses on earnings of more than £8,500 a year are subject to tax. This implies that bonuses on lower earnings are not subject to tax and National Insurance. But the Contributions Agency informs me categorically that contributions are required on bonuses. We have several part-time and lower-paid workers and I would be grateful for clarification.

Answer

Type your The previous letter was concerned with gifts other than cash bonuses and in particular Christmas presents to staff. In this situation these gifts are only taxable on the individuals if their earnings are more than £8,500 a year. The Inland Revenue must be notified annually on form P11D of benefits-in-kind, including gifts, for each member of staff. These forms must be submitted to the Revenue by July 6 following the end of the relevant tax year. A copy of the form must also be given to staff to enable them to complete their tax returns. All cash bonuses have to be included in their wages and salaries and taxed in the normal way. The information that you received from the Contributions Agency is therefore correct.