Continuing in our series of questions linked to Payroll, we look at Bonuses.

Question:

I want to give my staff cash bonuses this Christmas. Is this taxable?

Yes! Any bonuses must be put through payroll as you put wages through payroll, so the employee will pay tax and employees National Insurance via PAYE, and you will pay employers National Insurance on it.

Paying cash is fine – so long as it has been put through payroll.

In other words, for December, you could put the employers wage plus bonus through payroll, pay the wage part by cheque or BACS as you would normally, draw cash out of your business account, and pay this to them for the bonus.