Taxing Lump Sums & Bonuses

Over the holiday season you may give your employees a bonus or lump sum payment. Lump sum payments can include annual or special bonuses, cashed in annual leave, back pay and retiring or redundancy payments. Overtime or any regular payments are not lump sum payments.

Follow these steps to find out what tax rate to use for a lump sum payment:

  1. Work out what your employee has earned (before tax) over the past four weeks.
  2. Multiply this figure by 13.
  3. Add the lump sum payment to the figure in step 2.
  4. Use the table below to work out what income bracket your employee is in.
  5. Tax the lump sum payment at the tax rate shown in the right-hand column for that income bracket.

Income Bracket

Tax Rate

$14,000 or less


From $14,001 to $48,000


From $48,001 to $70,000


Greater than $70,000, but less than the 34.39% 

CC earner’s levy maximum threshold of $120,070 (for the 2016 tax year) 










 You can also apply PAYE at 34.45 cents in the dollar if the employee asks you to use this rate.