Annual Bonus question?

sarah7610

Hi, Can someone please explain to me how the yearly bonus from your employer works?
I work for Asda and every year we get our bonus but nobody really understands why we get taxed so much on it.
I only work 18 hours a week so last year my bonus was £125 but I was taxed over £40? Is this not a bit excessive?
Our bonus is also payed seperate from our wage, usually 2 weeks after.

chrisbur

Assuming that you are allready earning over the tax and NI threshold but not into the 40% tax band then combined tax and national insurance on £125 would be around £40 made up of £25 tax and £15 NI. If you are not earning over the tax/NI threshold or if it was really £40 tax plus NI on top of that then may be something wrong; to check would need to know tax code and basis along with exact details of gross tax and NI for the bonus payment along with the same for last two normal salaries, and gross to date, tax paid to date and month number from last salary or the bonus payment.

vax2002

Tax is around 37% in real terms once above your threshold, the "national insurance" is nothing of the sort and just another tax

paddedjohn

Some people get confused and think bonus's are tax free but they arent Your tax allowance of £7470 per year is spread throughout the year to allow you to earn about £140 p/w before stoppages, anything you earn above this (as a base rate taxpayer) the gov takes a roughly a third for tax and ni.