Do I have to pay tax on bonuses, tips or benefits?

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If you get money through your job that’s not part of your usual wages, like an annual bonus or tips from customers, you’ll have to pay tax on it, and usually National Insurance too.

Your annual bonus

If you get one, is treated as if it’s part of your normal wages. You’ll pay tax and National Insurance on it through PAYE, in the usual way.

If you get cash tips direct from customers or through a ‘tronc’ system (where tips are pooled and shared between staff members of the pool).

You also need to pay tax on them, but not National Insurance, provided the amount you get in tips does not involve your employer. It’s your responsibility to tell HMRC about these tips. They will then give you a new tax code estimating how much you get in tips each pay period, and taxes you on that amount. Find out more about troncs from HMRC.

If a customer gives you a tip via their bank card

If a customer tips you this way when paying for a meal or service, and your employer decides whether to share it with you, they are responsible for sorting out the tax and National Insurance. If the employer passes such payments to a tronc, then the rules above apply and no National Insurance is due.

A service charge is not the same thing as a tip

Because the customer doesn’t choose to pay it. A tip is a payment that’s given freely.

Benefits in kind

Sometimes your employer will offer benefits like a company car or health insurance as part of your remuneration package.These are known as ‘benefits in kind’.

You might need to pay tax on the value of these benefits.

  • Some benefits are always tax-free, such as employer contributions into a pension scheme for you, or childcare vouchers up to a limit.

  • Some benefits are always taxable. For example, goods that your employer lets you have for free or below cost price.

  • For some benefits it depends. For example, season-ticket loans are taxable if the value of all employer loans you get is more than £10,000 for the year.