Tips on taxable bonus

dandydon1903

I work for a large multinational and receive a performance related bonus at the end of the tax year. Although I am grateful for getting this bonus I am getting sick of Gordon Brown taking a huge chunk of it.

Does anyone have any suggestions for bonus options that are more tax efficient that I can suggest to my bosses ?

Bean_Counter

Perhaps take it as pension contribution. Take relief available on this, especially if you are a higher rate tax payer.

Andy_L

Pension contributions only defer the tax until you retire

If you're only a higher rate tax payer as a result of the bonus (and it's not a bonus you get every year) you could try to be it paid in chuncks in different years.

You could try and get creative with being self employed but you rapidly move into that grey area between tax avoidance & evasion

Innys

It's only partially true that pensions defer tax until retirement. You can take 25% of your pension pot tax free at retirement, according to current legislation anyway.

My philosophy is if you need the bonus for something urgent - mortgage deposit, to pay off debts or building work - take it and suffer the 22% or 40% tax. If you can possibly make do, put it into your pension. This becomes even more relevant, the older you get.

The bottom line is this - don't count on this, on any other Government in the future, providing you with a decent State Pension, especially with the ageing of the population. It is up to each of us to do it ourselves. If you can't/won't do that, don't bother retiring, you won't be able to afford to.