Tax-free bonuses after an employee-ownership sale
A company owned by an employee ownership trust (EOT) can pay each person up to £3,600 a year free of income tax, if the bonus is open to everyone and shared on the same terms. National Insurance is still due. We check the rules, share your pot and show the full cost.
Your answer
Answer the questions about your company and list your staff to see what can be paid free of income tax.
About this calculator
For a company owned by an employee ownership trust that wants to pay its staff a bonus. Up to £3,600 a year per person can be free of income tax (Income Tax (Earnings and Pensions) Act 2003, section 312A), but National Insurance is still due on every pound, for the employee and the company.
You type your staff in as a list: yearly pay, hours, years in the job and whether they're a director or related to one. We don't connect to your payroll. We ask the company rules as yes / no questions rather than testing them, and we use standard National Insurance (no Employment Allowance, and no lower rates for under-21s, apprentices or veterans).
The rules allow a bonus made of separate parts for pay, hours and service added together. We don't recognise that mix: it shows as failing the same-terms check, and we'd check it with you.
What happens to your answers
We don’t keep them. Your answers go to our server to do the sums and aren’t stored or logged. If you copy a link to your answers, they’re in the link itself, so only share it with people you trust.
How it’s worked out
First we check your answers about the company and the bonus, and that directors and their relatives are no more than two fifths of everyone on your list. A new-starter rule can't be longer than 12 months.
Then we share your total the way you chose, in whole pence, or take the amounts you picked, and check they differ only in line with pay, hours or length of service (to within £1), with nobody taking part left on nothing.
Each person's bonus is free of income tax up to £3,600, less anything already paid this tax year. National Insurance is worked on top of their pay for the month or week it's paid in (directors on yearly pay). In the example, £10,000 is shared in line with pay across five people: all of it is tax-free, and with £1,500 of employer's National Insurance it costs £11,500.
Worked example
£10,000 of these bonuses can be paid free of income tax.
2026/27 rates · the company and bonus rules as you answered them · shared in line with pay · paid monthly, directors on yearly pay · directors take part · no new starters left out · no earlier tax-free bonuses · standard National Insurance
| People on your list | 5 |
|---|---|
| Directors and their relatives (at most two fifths) | 2 |
| People who take part | 5 |
| Tax-free limit for each person this tax year | £3,600 |
| Person 1: bonus £1,775.15, tax-free £1,775.15, National Insurance taken from them £136.84 | £1,775.15 |
| Person 2: bonus £1,420.12, tax-free £1,420.12, National Insurance taken from them £113.61 | £1,420.12 |
| Person 3 (director): bonus £3,076.92, tax-free £3,076.92, National Insurance taken from them £61.54 | £3,076.92 |
| Person 4 (related to a director): bonus £1,656.80, tax-free £1,656.80, National Insurance taken from them £132.54 | £1,656.80 |
| Person 5: bonus £2,071.01, tax-free £2,071.01, National Insurance taken from them £117.76 | £2,071.01 |
| Total bonuses | £10,000 |
| Employer's National Insurance at 15%, on each month's pay (directors on yearly pay) | £1,500 |
| Total cost to the company | £11,500 |
| National Insurance taken from staff | £562.29 |
| Taxed as normal pay | £0 |
| Free of income tax | £10,000 |
Worked out using the tax-free bonus rules for employee-owned companies (Income Tax (Earnings and Pensions) Act 2003, sections 312A to 312H) and HMRC's National Insurance rates for the 2026/27 tax year. Not legal or tax advice.
Questions people ask
Is the bonus free of National Insurance as well?
No. Only income tax is saved. The company still pays employer's National Insurance, and staff still pay theirs, on every pound of the bonus.
What if a bonus goes over the limit for one person?
The part over £3,600 is taxed as normal pay through payroll, at that person's own rates. The rest stays tax-free. We show you the split.
Why do you need everyone, even directors we leave out?
One rule looks at how many of your staff are directors or related to one, counting everyone, taking part or not. People you leave out still count in that test but get no bonus.
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