Tax on incentive rewards
21/09/2023

Companies may use incentive award schemes to encourage their employees in various ways. For example, to sell more of their own goods and services. The award can be in forms including cash, vouchers or other gifts.

Where an employer meets the tax payable on a non-cash incentive award given to a direct employee, by entering into a PAYE settlement agreement (PSA), the award is not chargeable to tax on the employee.

With the exception of non-cash awards covered by a PSA, the incentive awards made to employees are chargeable as employment income. The value of these awards is calculated as follows:

Cash
The value to use is the total amount of cash awarded.

Vouchers
If the award consists of vouchers, then the value to use is the full cost to the provider of making the award.

Other gifts
If the award is something other than vouchers, then the charge is usually the full cost to the provider of making the award. There are certain exceptions for the low paid.

There are also concessions which HMRC makes to enable you to say thank you to staff including encouragement awards, suggestion schemes and to reward long service.


About us  

Our director-led service is supported by the expertise of our highly skilled staff. We believe that our reputation for technical excellence is one of the main reasons for the company’s continued growth. 

Since the 1960’s we have been looking after the financial needs of our diverse database of clients. The practice of today evolved from two long-established firms originating in Coventry (Luckmans) and Kenilworth (Duckett Parker) merging in 2000.

Our vision in 2000 was to combine the directors' expertise to the greatest advantage for you – our client. That ethos still holds true and has enabled us to build a relationship with our clients that lasts.

Legal

Registered to carry out audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

Contact us

LDP Luckmans
1110 Elliott Court, Coventry Business Park
Herald Avenue
Coventry
CV5 6UB

+44 (0) 24 7662 7200
partners@luckmans.com
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