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RD 6: Certain benefits and payments
or “Benefits and payments considered part of your income for tax purposes”
You could also call this:

“Money from your job that's not part of your regular wages”

Extra pay is money you get from your job that’s not part of your regular wages. It’s usually a one-time payment or paid in parts. Here are some examples of extra pay:

You might get extra pay as a bonus, a share of profits, or a gift from your employer. If you lose your job, you could receive extra pay as a redundancy payment. When you retire, you might get extra pay too.

Sometimes, if your pay goes up, you might get extra pay to cover the time from when the increase started until it shows up in your regular wages.

Extra pay can also include certain benefits your employer gives you, or money you get for agreeing not to work for competitors or for leaving your job.

If your employer accidentally paid you too much before, and you haven’t paid it back, that might be treated as extra pay too.

Extra pay doesn’t include money that you don’t have to pay tax on.

If your employer didn’t pay you correctly under the Holidays Act 2003 or your work agreement, and they’re fixing that mistake, that payment is also treated as extra pay. But if they’re just paying you wages they forgot to pay before, only the first of those catch-up payments is not extra pay.

When we talk about work agreements here, we mean the kind defined in the Employment Relations Act 2000. This includes old individual employment contracts but doesn’t include contracts for services.

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Next up: RD 7B: Treatment of employee share schemes

or “How employers handle taxes for employee share schemes”
Next

Part R General collection rules
Employment-related taxes: Types of PAYE income payments

RD 7Extra pay

  1. An extra pay—

  2. means a payment that—
    1. is made to a person in connection with their employment; and
      1. is not a payment regularly included in salary or wages payable to the person for a pay period; and
        1. is not overtime pay; and
          1. is made in 1 lump sum or in 2 or more instalments; and
          2. includes a payment of the kind described in paragraph (a) made—
            1. as a bonus, gratuity, or share of profits; or
              1. as a redundancy payment; or
                1. when the person retires from employment; or
                  1. as a result of a retrospective increase in salary or wages, but only to the extent to which it accrues from the start of the increase until the start of the first pay period in which the increase is included in salary or wages; and
                  2. includes a benefit under section CE 1(1)(d) (Amounts derived in connection with employment) in relation to which the employer has made an election under section RD 7B to withhold an amount of tax; and
                    1. includes an amount of income that a person derives under section CE 9 (Restrictive covenants) or CE 10 (Exit inducements) if the income is derived in connection with an employment relationship between the person and the person who paid the amount; and
                      1. includes an unrepaid PAYE income overpayment that is treated as all or part of an amount of extra pay under section RD 8B(2)(b); and
                        1. does not include a payment of exempt income.

                          1. Repealed

                          2. A remedial payment made in relation to 1 or more of a person’s entitlements under the Holidays Act 2003, an employment agreement, or both, is treated as an extra pay if—

                          3. the payment is made to a person in connection with their employment; and
                            1. but for this subsection, the payment would be a payment of salary or wages or an extra pay, or a combination of both; and
                              1. the payment is made to the person to meet all or part of a shortfall in 1 or more previous payments to the person who has an entitlement under the Holidays Act 2003, or an employment agreement, or both.

                                1. A payment made to a person to address some or all of a failure to pay the person any salary or wages for a pay period is excluded from a remedial payment under subsection (3). If more than 1 payment is made to the person to address the failure, this subsection applies to exclude only the first of these payments.

                                2. For the purposes of subsection (3), an employment agreement has the meaning given by section 5 of the Employment Relations Act 2000 except that—

                                3. it includes an individual employment contract continued in force by section 242(1) of that Act; and
                                  1. it excludes a contract for services described in paragraph (b) of the definition.

                                    Compare
                                    • 2004 No 35 s OB 1 extra pay
                                    Notes
                                    • Section RD 7(1)(b)(iv): replaced, on , by section 193(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(1)(bb): inserted, on , by section 56(1) (and see section 56(3)) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                                    • Section RD 7(1)(bb): amended, on , by section 192 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(1)(cb): inserted, on , by section 253(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                    • Section RD 7(2) heading: repealed, on , pursuant to section 193(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(2): repealed, on , by section 193(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(3) heading: inserted, on (with effect on 1 April 2008), by section 194(1) (and see section 194(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(3): inserted, on (with effect on 1 April 2008), by section 194(1) (and see section 194(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(4) heading: inserted, on (with effect on 1 April 2008), by section 194(1) (and see section 194(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(4): inserted, on (with effect on 1 April 2008), by section 194(1) (and see section 194(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(5) heading: inserted, on (with effect on 1 April 2008), by section 194(1) (and see section 194(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7(5): inserted, on (with effect on 1 April 2008), by section 194(1) (and see section 194(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                    • Section RD 7 list of defined terms amount of tax: inserted, on , by section 56(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                                    • Section RD 7 list of defined terms unrepaid PAYE income overpayment: inserted, on , by section 253(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).