Can I Claim Employee Salaries and Wages as a Business Expense in Guernsey?
Yes, salaries and wages paid to employees are fully deductible against Guernsey corporate income tax. The company must operate the ETI (Employees Tax and Insurance) PAYE system, deducting income tax and social insurance from gross pay and remitting to the Revenue Service quarterly.
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What Revenue Service, States of Guernsey says
Employee remuneration (salary, wages, bonus, commission, benefits in kind above the de minimis threshold) is deductible as a trading expense. The employer must register with the Revenue Service, deduct tax using coding notices and deduct employee social security. Coding and direction notices expire on 31 December each year. Deductions apply to anyone receiving a wage, including company directors and part-time or casual staff. Quarterly returns and payments are due 15 April, 15 July, 15 October and 15 January.
When you can claim
- Monthly salary payments to employees
- Bonuses and performance-related pay
- Employer social insurance contributions (Class 1 employer rate 7.1% in 2026), a deductible cost in addition to the salary
- Benefits in kind provided to employees, provided they are commercially justified
- Redundancy and severance payments (subject to Employment Protection rules)
- Employer secondary pension contributions under auto-enrolment
When you cannot claim
- Remuneration to non-employees (contractors should be invoiced separately)
- Dividends paid to shareholder-directors (this is a distribution, not salary)
- Excessive remuneration to connected parties not at arm's length
Good to know
Pro tip: Ensure the quarterly returns are filed by 15 April, 15 July, 15 October and 15 January. The employer social security contribution of 7.1% in 2026 is itself a deductible cost: remember to claim it. The same quarterly dates apply to the Compensation of Employees return for all employers.
Important: The 2026 Class 1 rates are 7.5% for the employee and 7.1% for the employer. The monthly lower earnings limit is £832 and the upper earnings limit is £16,380. Employees over pension age attract employer-only contributions. The benefit-in-kind rules changed for 2026, including motor vehicle benefit.
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