Witholding Bonus
Options
Jaguar_Skills
Posts: 547 Forumite
Hello again everyone.
I have also added this in the cutting tax thread as I am not sure whether that is more suitable.
You were all very helpful previously when I had some queries re income/tax/pension payments and things have moved on a little since then.
I am due to be paid my bonus at the end of this month which will be £28k. I realise that I am in a very fortunate position but would still like advice if I may.
I queried with my director whether salary sacrifice is an option as with current wage I am going to get taxed quite heavily. Unfortunately as our workplace pension only came in last year this is not yet an option and he needs to take advice from pension provider St James Place. He has also said he may be able to pay direct into my personal pension but also needs to take advice on this.
The suggestion was whether I wanted to take all my bonus this month or withhold it so that I can invest it into the workplace pension when salary sacrifice becomes an option. It is all very confusing working out how much nett pay I will get etc so wondered if anyone can give some options/advice?
My inclination is to take the full bonus this time around, as we are having our first baby and would be good to have higher cash reserve then utilise the salary sacrifice as and when it comes into force. This is also relevant as if I withold bonus, I lose company contribution to my pension. My financial stats are below, which I guess are important for people to advise:
Gross Salary £52,917
September 2016 Bonus £16,500
March 2017 Bonus £28,000
Total = £94,417
Workplace pension:
From Apr 2016 - Employer 1%, Employee 0.8% Net
From Oct 2017 Employer 3%, Employee 1.6% Net
From Oct 2018 Employer 5%, Employee 1.6%
Does anyone have any useful advice about options this month as I have to let him know in the next couple of days?!?!?!
I have also added this in the cutting tax thread as I am not sure whether that is more suitable.
You were all very helpful previously when I had some queries re income/tax/pension payments and things have moved on a little since then.
I am due to be paid my bonus at the end of this month which will be £28k. I realise that I am in a very fortunate position but would still like advice if I may.
I queried with my director whether salary sacrifice is an option as with current wage I am going to get taxed quite heavily. Unfortunately as our workplace pension only came in last year this is not yet an option and he needs to take advice from pension provider St James Place. He has also said he may be able to pay direct into my personal pension but also needs to take advice on this.
The suggestion was whether I wanted to take all my bonus this month or withhold it so that I can invest it into the workplace pension when salary sacrifice becomes an option. It is all very confusing working out how much nett pay I will get etc so wondered if anyone can give some options/advice?
My inclination is to take the full bonus this time around, as we are having our first baby and would be good to have higher cash reserve then utilise the salary sacrifice as and when it comes into force. This is also relevant as if I withold bonus, I lose company contribution to my pension. My financial stats are below, which I guess are important for people to advise:
Gross Salary £52,917
September 2016 Bonus £16,500
March 2017 Bonus £28,000
Total = £94,417
Workplace pension:
From Apr 2016 - Employer 1%, Employee 0.8% Net
From Oct 2017 Employer 3%, Employee 1.6% Net
From Oct 2018 Employer 5%, Employee 1.6%
Does anyone have any useful advice about options this month as I have to let him know in the next couple of days?!?!?!
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Comments
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I really hope you're contributing significantly more than 1% of that excellent package into retirement planning.0
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PeacefulWaters wrote: »I really hope you're contributing significantly more than 1% of that excellent package into retirement planning.
Thanks for your comment. At the moment I cannot put anything additional into my workplace pension.
I contribute £600 per month into a private pension.
Once sal sacrifice is introduced I will be increasing where I can.0 -
Jaguar_Skills wrote: »At the moment I cannot put anything additional into my workplace pension.
I contribute £600 per month into a private pension.
What advantage are you gaining from this over adding it to your company pension?0 -
If they wont allow him to contribute extra, he is gaining tax relief on it.
I would ask your employer whey they are using St James Place, who are one of (if not the) most expensive companies to use?
Put your bonus into your personal pension instead.0 -
If they wont allow him to contribute extra, he is gaining tax relief on it.
I would ask your employer whey they are using St James Place, who are one of (if not the) most expensive companies to use?
Put your bonus into your personal pension instead.
But isnt the bonus then already net of tax? I am pretty sure he won't want to change it was just something which was offered which he went with.0 -
Jaguar_Skills wrote: »But isnt the bonus then already net of tax? I am pretty sure he won't want to change it was just something which was offered which he went with.
Given your salary you are likely to be higher rate tax payer. If you placed in a pension after tax then you will still get 40% tax relief (via a self assessment form I believe), and the only thing you don't gain, which you would via salary sacrifice, is NI which at the salary you are on, is worth 2%.0 -
Yes I am a higher rate tax payer at the moment. Does anyone have any views on whether it would be benficial to withold or take the bonus at this stage?
I guess things to weigh up would be I would lose company contribution if I hold it vs higher tax if I take it.
I am leaning towards taking it this time and then trying to sacrifice more in the future as and when I can.0 -
I would pay the bonus into a pension, get the BRT relief via the provider, and call HMRC to inform them of the contribution (and get the other TR via PAYE)0
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And then look at paying some into your OHs pension to protect her from the void period during her maternity leave. If your relationship is a very long term thing then it will be to your tax advantage to have her income with a lower tax liablility increased whilst your highly taxable income may decrease.0
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If the relationship is to be long term, it will be to his tax advantage to be married. AS then he can have some of her spare PA each year. Not to mention she can inherit ISA and pensions tax free.0
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