Bonus and tax

hugonellie

I was wondering if anyone can help me...my work have offered me a 2.5k bonus, split quarterly if I hit my targets...so a possible £625 before tax/pension. I earn 27.5k a year basic and pay 3% into my pension (they pay3%), can anyone tell me if this will push me into the higher bracket for tax on those months I get it? If I get it that is!

They have offered to pay it monthly, but I'd prefer the quarterly option if I won't get hammered on the tax. I know over the year it will even itself out, but I just want to make sure I'll actually see a distinct difference in my pay slip that month - or I'll just pick the monthly option.

I do freelance work, so I'm aware that in total I'm going to be getting close to the 40% bracket - but this is worked out after my first full time employment job is that correct? And I can pay a little more into my pension if I'm coming close to offset it a little?

Thanks

nearlyrich

Don't worry you are nowhere near the threshold for 40% and you only pay the 40% on the bit above anyway. The HMRC site here tells you what you pay tax on at what rates and £30k is under the threshold for 2013/14 it's £32010..

If you have a company car or other benefits in kind this might change but on PAYE income tax you are not going to see anything taxed at 40%.

hugonellie

ah awesome - thank you! I just didn't want to wait 4 month, then have half of it took off me - that's if I actually get it in the first place!

I don't have a company car or any other benefit - unfortunately.

Thanks again :beer:

CLAPTON

for 2013-14 the 40% tax band starts at 41,450 i.e. tax allowance of 9440 plus 20% tax band 32,010

and of course the pension contribution is tax free so I would say unfortunately you are a long way from paying 40% tax unless your freelance work is very profitable

although it would probably make no difference in your case, it is generally better to have a bonus as one big lump sum.
the total tax for the year will be the same but you may pay less NI which works on a monthly rather than yearly basis.

hugonellie

CLAPTON wrote: »

for 2013-14 the 40% tax band starts at 41,450 i.e. tax allowance of 9440 plus 20% tax band 32,010

and of course the pension contribution is tax free so I would say unfortunately you are a long way from paying 40% tax unless your freelance work is very profitable

although it would probably make no difference in your case, it is generally better to have a bonus as one big lump sum.
the total tax for the year will be the same but you may pay less NI which works on a monthly rather than yearly basis.

I think I'll go with the quarterly option, because I don't really want to wait a year before I get something...plus there's the risk of the company not being here in a year, me moving on etc

thanks again for the help

kidmugsy

nearlyrich wrote: »

£30k is under the threshold for 2013/14 it's £32010..

No, no, no; the threshold for 40% tax in '13-'14 is £32010 plus the personal allowance (£9440) = £41450.

nearlyrich

kidmugsy wrote: »

No, no, no; the threshold for 40% tax in '13-'14 is £32010 plus the personal allowance (£9440) = £41450.

But I didn't know when I posted if the OP had a full personal allowance did I? OP just needed to know they were not going to pay tax at 40% and I did give them a link to HMRC site;)