Cash bonus payments

Summary

Cash bonuses may be contractual or discretionary and may be linked to the achievement of performance targets, for example, at individual, business unit or corporate level. It is increasingly common, particularly for senior employees and employees working in the financial services sector, for an element of a bonus payment to be deferred (and paid out at a later date).

Tax

A liability to income tax and national insurance contributions (NICs) will arise on receipt of a cash payment on the full amount of the cash payment. If the cash payment is made by the employer, it is normally entitled to claim a corporation tax deduction for an amount equal to the payment.

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