Tax on bonus

jem16

KPR11 wrote: »

Ooopps Clapton is quite right, I have not added the personal allowance to £34,700 - the upper limit for basic rate band is £43,875 :doh:

That's the problem - a lot of people do forget to factor in the personal allowance as well as existing pension contributions.

Until the OP comes back and clarifies this is all specualtion.

zygurat789

jem16 wrote: »

Except he didn't say that. He said he would lose most of his bonus if he has to pay 40% tax on it. Even if he did have to pay 40% tax on his whole bonus he wouldn't lose most of it as he would still get 60% of it which can hardly be described as "most". This is what the previous posters have taken issue with not the complications or otherwise of the tax system.



The problem with that advice is that the OP may be making a pension payment that may not be necessary. We don't know his total income and we don't know if he is already making pension payments that may take him out of the 40% tax bracket anyway. We also don't know if he has made the common mistake of not taking his personal allowance into consideration before deciding he is a 40% tax payer.

More info is needed from the OP before anyone can advise correctly.

£37,400 X 20% + £7480 + Rest of bonus X 40% = most of bonus of £8500.
I know you understand tax, but most people don't and this is a very common misconception. My interpretation may not be what the OP meant but it is probable.
If you read my post I did say "taxable income exceeding 43875" ie taxable at 40% thus covering your point.

My point was don't be unpleasant to someone just because they know less about your specialist subject than you.

jem16

zygurat789 wrote: »

I know you understand tax, but most people don't and this is a very common misconception. My interpretation may not be what the OP meant but it is probable.

You are correct - a lot of people do have the misconception that once they enter the 40% tax bracket they pay 40% tax on everything.

If you read my post I did say "taxable income exceeding 43875" ie taxable at 40% thus covering your point.

I did see this - Clapton had already mentioned it in Post 2 as well. However what I was pointing out that pension contributions reduce your taxable income and the OP may not be aware of that either.

My point was don't be unpleasant to someone just because they know less about your specialist subject than you.

Nobody seemed to be being unpleasant because of the OP's lack of knowledge of tax. They were perhaps poking fun at the OP's lack of basic Maths in thinking that 40% of something was most of something.

zygurat789

jem16 wrote: »

You are correct - a lot of people do have the misconception that once they enter the 40% tax bracket they pay 40% tax on everything.



I did see this - Clapton had already mentioned it in Post 2 as well. However what I was pointing out that pension contributions reduce your taxable income and the OP may not be aware of that either.



Nobody seemed to be being unpleasant because of the OP's lack of knowledge of tax. They were perhaps poking fun at the OP's lack of basic Maths in thinking that 40% of something was most of something.

See your first paragraph,

Like I said "Taxable income exceedind 43875.

jem16

zygurat789 wrote: »

See your first paragraph,

Sorry don't follow you.

What exactly has the basic fact of percentages that 40% is even less than half of the whole got to do with tax and its various misconceptions? It's basic Maths that children learn at 9 years of age or earlier.

zygurat789

jem16 wrote: »

Sorry don't follow you.

What exactly has the basic fact of percentages that 40% is even less than half of the whole got to do with tax and its various misconceptions? It's basic Maths that children learn at 9 years of age or earlier.

See first line of my post No13. (Now edited = for +)

KPR11

zygurat789 wrote: »

£37,400 X 20% + £7480 + Rest of bonus X 40% = most of bonus of £8500.

I have my doh moments today but surely the maximum the OP will be taxed is 40% + 1% = 41% which equals to 0.41 X £8,500 =£3,485

Which means that the OP is still left with £5,015 and in my books or most people's books that is not "most of the bonus" or is it? :think:

jem16

zygurat789 wrote: »

See first line of my post No13. (Now edited = for +)

OK - if I follow this;

£37,400 X 20% = £7480 (I changed your + sign back to an + sign).

You presumably came to this because you meant if the OP meant all of his income would now be taxed at 40% he would then have to pay a further 20% on his already paid tax? Am I correct so far? ( Not of course that the UK tax system works like that )

Rest of bonus X 40%;

How do we know what rest of bonus is? It could be the whole £8.5k for all we know which if taxed at 40% would make £3400 added to £7480 would be £10880.

However to be quite honest I didn't get the impression that the OP meant he would suddenly get taxed at 40% on everything for the whole year as he said;

I'm getting a bonus of £8.5k but this will push me into the 40% tax bracket for that month only so I'm going to lose most of it.

This is my first job so I'm not sure but i will get some of that money back throughout the year when I go back to paying my usual tax or is it gone forever?

Valli

never mind that - lets get down to the nitty gritty

OP

1) Are you male?
2) if yes are you married?
3) If no would you like to be?

(is always on the lookout for the next Mr Valli )
This one definitely ticks the 'Minted' box :rotfl:

iamana1ias

Valli wrote: »

never mind that - lets get down to the nitty gritty

OP

1) Are you male?
2) if yes are you married?
3) If no would you like to be?

(is always on the lookout for the next Mr Valli )
This one definitely ticks the 'Minted' box :rotfl:

If you check his previous posts (and those of his other identity) you'll see that he's neither a solicitor, nor single

I'd have thought a research scientist on circa £30k (which is what he really is) would be able to research tax without quite so much handholding though