Tax on Bonus Paid in Stock

GJS123

I recently received an annual bonus from my employer. They are an American company listed on the NYSE. Part of the bonus was paid in shares or "Restricted Stock Units". These were really "restricted" in name only, I think, as they vested a couple of days after they were awarded and I sold them straight away. I was paid the proceeds by wire transfer in Sterling to my UK bank account I'm a higher rate tax payer earning approximately £75k/year

The shares were made availiable in a dealing account set up for each employee by the company and exactly 40% of the shares were immediately (before they vested) sold to cover tax liability.

I am not sure whether I have paid this tax in the US or UK but 40% on the whole amount seems too much for UK tax. I use a rough guide of 33% on my income for tax and NI estimations, which takes into account the personal allowance and the two tax bands applicable to me.

Have I paid too much tax on these shares?

Thanks in advance for any advice.

getmore4less

Your allready in the 40% earnings at £75k so any extra will be 40%, might also need a bit more for NI.

If it goes over £100k total that may have other implications.

time for a full tax return.

Randvegeta

If you don't live/work in the US, you should not be liable for US tax.

GJS123

getmore4less wrote: »

Your allready in the 40% earnings at £75k so any extra will be 40%, might also need a bit more for NI.

If it goes over £100k total that may have other implications.

time for a full tax return.

Yes, but I don't pay 40% on everything after earning the threashold amount i.e. my take home pay does not go down the further into the tax year I get. It is the same each month. Why would the income from the bonus be treated differently from my salary?

I already complete a full return each year.

I beleive that you pay tax in the country from which you are paid, not where you work or live. I am paid by one of my employer's UK entities, so I pay UK tax. I'm not sure where the bonus came from. It could have been a US entity.

agrinnall

If you are seriously questioning this I suggest you do a bit of self education on tax. Your marginal tax rate every month is 40%, meaning that everything you earn in addition to your normal salary is taxed at that rate. I can't be bothered to explain to you why you pay the same amount of tax on your salary each month but rest assured, 40% of your bonus has correctly gone to HMRC.

somethingcorporate

Assuming you were over the 40% band for that month you will pay the full 40% rate on that bonus amount.

You pay 33% as a blended rate because each month you get a certain element of your tax free allowance and 20% rate.

Since you are already in the 40% bracket every month from your basic salary level any bonus on top of this will be taxed at the highest (40%) rate.

Edit: I have to agree slightly with the above post, you make a good salary but evidently have little idea how tax works - it would be worth educating yourself and see how you can bring your tax burden down (childcare vouchers, pension contributions etc).

pjclar02

At first sight, it would seem you have not paid enough on the gain, because if the share are listed on the NYSE, they will be readily convertible assets, which would mean that National Insurance should probably have been payable at 2%.

Other than that, if you earn £75k per year, then you will pay 40% tax on any income up to the additional rate tax threshold of £150k. Beware also that if the share gain puts you over £100k income you will start to lose your personal allowance so you may end up with a further tax liability when you fill in your self-assessment return.

getmore4less

Because of NI once over the lowere earning threshold base tax is actualy over 30% then goes upto 40%+NI(at the lower rate).

agrinnall

To add to my previous post, if you do make some effort to understand how tax works you may well find that you can reduce the amount that you pay, for instance by increasing pension contributions.