Yes, you can — but a bonus is taxed very differently from a dividend, so run the numbers before you commit.
A bonus is employment income, so it goes through your payroll exactly like salary: Income Tax under PAYE, employee’s Class 1 NICs (8% on earnings above the £12,570 primary threshold for 2026/27) and employer’s Class 1 NICs (15% above the £5,000 secondary threshold for 2026/27). It must be reported on an FPS on or before the day you pay it — you can’t backdate payroll entries.
The attraction is corporation tax: unlike dividends, a bonus is deductible against the company’s profits. But there’s a timing condition. The company can only deduct the bonus in the year it relates to if the bonus is actually paid within nine months of the end of that accounting period (the rule is in section 1290 of the Corporation Tax Act 2009). Paying your March bonus in April is fine. Voting or minuting it before the year end helps, but on its own it isn’t enough — the liability must be unconditional at the year end, so minute the bonus as a firm commitment rather than something you can still cancel at your discretion.
So which is cheaper — bonus or dividend? Dividends carry no NICs at all, but they aren’t deductible. A bonus attracts both lots of NICs, but the whole amount (including the employer’s NICs) is deductible, saving corporation tax at your marginal rate. On a £5,000 bonus the employer’s NICs add roughly £750 of cost, but the deduction saves corporation tax on the full £5,750 — so for most small companies the bonus still comes out ahead, and you also earn NICs qualifying years towards the state pension.
Two practical points: keep the board minute, the payroll record and the bank payment as an evidence trail, and don’t declare a bonus you can’t afford to actually pay within nine months — miss that window and the deduction slips into the next accounting period.
