Tax on bonus

funkyfish586

Hi all, i just posted this in the debt free section but think it would be better off in here

My partner is getting a £2000 bonus at the end of this month this is a one off bonus & i dont think will get any more this year. He earns £35k a year.

Does anyone know roughly how much we will be taxed on the £2000?

thanks
x

Procrastinator333

Hello,

Most payroll processors work on the assumption that any income in the month will continue every month going forard. So quite a chunk of it may get taxed at 40%.

E.g. £35k is bout £3k per month. But then will get a bonus of £2k next month. So £5k. This will then be taxed on the assumption it is a new monthly pay rate. E.g as is if he is getting a £60k salary. Therefore pushing him into the 40% band by quite a bit. Someone else may work out the detail, but short term I would work on the assumption he will pay 40% in tax on it next month to be safe, though it will be a little less.

Don't worry though, this tax overpayment does come back. As the months go on and the bonus isn't repeated, the overpaid tax is given back via lower tax charges in future months.

In the end, that would give him a £37k salary, under the 40% band, so 20% PAYE. He may not actually pay 11% NI on it all though as I think it takes him over the UEL for the month. So in the end he may pay 28%ish of it in tax.

E.g. say take home is normally £2k per month.

April £2k as normal
May £3.2k
June £2.1k
July £2.1k
etc as the overpayment is paid back.

Having written all of this, what are the odds someone has pointed you to a tax calculator that gives you the exact numbers!!

Enjoy spending it on something nice!

funkyfish586

Im really gutted by this this money is the only little bit of money we have and our car is costing £1000 to fix. We have a baby on the way & we needed the extra bit of money to spend on stuff. I cant believe we will be taxed £800 on a £2000 bonus. That doesnt seem right or fair even if it does come back to us eventually. Gutted

Procrastinator333

I'm just saying for budgeting, play it safe and assume you will only see £1200 of it next month. I think it will be slightly higher, I don't want to work it out as it is quite a long calculation and if I make a mistake it could cause problems. My guess is he will get more like £1300-£1400 of it next month and then see his net pay a bit higher for a few months after that.

By the end of the year, he will have paid20% paye - So £400 definately. And worst case NI @ 11% £220. However this will not be 11% as it will push it out past the Upper earnings limt and some will be charged at 1% instead of 11%.


Have a look at this:

http://www.lowtax.co.uk/common/calculators/payroll.html

funkyfish586

thank you for all your help. Someone else said to me as its the 1st month of the new tax year it could be taxed even more which scared me! X

Procrastinator333

Using that, assuming tax code is 647, normal net pay is £2,174

Putting in the bonus in 1 month gives £3,427 net pay.

Therefore I reckon he will get and extra £1,251 in his net pay next month.

In the months that follow, I think he will get about another £150 back via reduced tax costs and will end up with about £1400 in the end.

Please keep in mind these are just rough calcs on my part. Hopefully they are close, but as I said, probably best to work on the assumption he will only see £1200 extra next month and see any more as an extra.

Procrastinator333

Yeah, that is what I was getting at, in month 1, they will see a salary of £3k plus bonus of £2k and assume he will get that every month.

Hence why he will pay that 40% tax.

But as the months go on, that gets repaid via a lower tax bill in future months.

funkyfish586

just had a look at a payslip & tax code is 583 which is just slightly less. £600 tax is ok i guess :mad:

thanks for your help x:D