How to reduce tax on bonus?

Oil_Engineer

I am lucky enough to receive a retention bonus [for a 4 year tie in] of 50K (in shares) this month, on top of my salary of 65K, and annual bonus, 10K. The share acquisition date coincides with a holiday to Dubai. Is there any way that I can reduce my tax exposure?

chrismac1

The first thing to note is that between £100,000 and £112,950 you will be getting taxed 60 pence for every pound of income. Based on your post, a £20k contribution to a personal pension such as a low-cost SIPP will eliminate this 60% hit exactly. I have a calculator for clients in exactly your position so they know what the right amount of pension contribution is - PM me for a copy. Note there are other ways of getting your tax bill down, but on an 80-20 basis the pension is the favourite. Also your tax position is unlikely to be as simple as you've stated in the post so there may be little bits and pieces which can affect things.

ceeforcat

Is there no possibility of it being split - half now, half in April for example, always assuming you do not get the same next tax year of course.

soulsaver

Oil_Engineer wrote: »

I am lucky enough to receive a retention bonus [for a 4 year tie in] of 50K (in shares) this month, on top of my salary of 65K, and annual bonus, 10K. The share acquisition date coincides with a holiday to Dubai. Is there any way that I can reduce my tax exposure?

Gift aid the bonus to charity.:)

Oil_Engineer

Hi - did ask about splitting it between March and April, but my employer was not up for it. It is a bit frustrating as I will be taxed on the value of the shares on the date of acquisition rather than over the tax year or over the past 4 years (acquisition period). Looks like pension is the best way forward.

Thanks Guys!

MrFund

Oil_Engineer wrote: »

Hi - did ask about splitting it between March and April, but my employer was not up for it. It is a bit frustrating as I will be taxed on the value of the shares on the date of acquisition rather than over the tax year or over the past 4 years (acquisition period). Looks like pension is the best way forward.

Thanks Guys!

I think you should look into the treatment of the tax on shares, as I recall it might be subject to capital gains tax, but I believe that there was at one point, special tax treatment for employees of the corporation they were granted shares in (ie. possibly a lower tax rate on capital gains on shares when they were granted). Not sure if that exists anymore though.