Will £12k BONUS pay affect tax deducted from my savings?

[Deleted User]

My salary is £30K. I could be getting a bonus of around £12K before tax shortly. As I understand it, the 40% tax band kicks in at around £34,600. Will this £12K bonus technically make me a 40% tax payer for this year; AND how will this affect my tax situation regarding my savings of approx £45K?

Tax is currently being deducted from my savings at 20% because I am still a 20% tax payer based on my salary of £30K. Will the inland revenue want 40% of any interest earned on my savings AFTER I have received the £12k bonus during this tax year?

Please can someone clarify things for me. Thank you all in advance for your help. :money:

tom188

If you have the standard tax code 522L this year then you must pay 40% tax on any income over £42055 this tax year. As you will earn over this threshold it is your responsibility to declare your savings income to the HM Revenue and Customs and pay the extra tax owed to them as part of your tax return.
http://www.hmrc.gov.uk/rates/it.htm

[Deleted User]

tom188 wrote: »

If you have the standard tax code 522L this year then you must pay 40% tax on any income over £42055 this tax year. As you will earn over this threshold it is your responsibility to declare your savings income to the HM Revenue and Customs and pay the extra tax owed to them as part of your tax return.
http://www.hmrc.gov.uk/rates/it.htm

Hi,

Thanks for your reply. My current tax code is 476L and my salary is £30k. My savings are being taxed at 20% because I'm not a 40% tax payer based on salary of £30k. I don't know how this bonus of £12k (If I get it) before tax will affect interest on my savings this tax year?

StevieJ

One benefit of your bonus will be a reduced annual take of National Insurance conts, only 1% above £34,840 pa. The calculations are done on a weekly/monthly basis so you save even more. You may want to consider the NS&I tax free savings certificates as these may be suitable for someone in your position.

http://www.nsandi.com/products/ilsc/index.jsp

LittleVoice

The lower number in the tax code means you have less than the tax-free allowance which those with 522L receive.

The actual tax deducted from your savings interest at source by the bank/building society will still be at 20%. If you receive your £12K bonus you will simply have to pay more tax via your annual tax return in due course.

tom188

basically, if at the end of the tax year your total income (salary, bonus, savings and investments income) is more than about £4760+£34600=£39360 then you will have to declare this and pay HMRC the higher rate tax due, normally through filling in the tax return.

You pay the extra tax direct to HMRC so there is no need to get your bank/bs to change anything.

StevieJ

tom188 wrote: »

basically, if at the end of the tax year your total income (salary, bonus, savings and investments income) is more than about £4760+£2230+£34600=£41590 then you will have to declare this and pay HMRC the higher rate tax due, normally through filling in the tax return.

You pay the extra tax direct to HMRC so there is no need to get your bank/bs to change anything.

I don't think that is correct, it should be 4760+34600 = £39,360.


http://www.hmrc.gov.uk/rates/it.htm

tom188

yes im double counting, i will edit my post.

Cook_County

You can of course avoid going into the 40% tax band just by investing enough into your pension this year ...

[Deleted User]

Cook_County wrote: »

You can of course avoid going into the 40% tax band just by investing enough into your pension this year ...

Hi,

Please can you elaborate...

Many thanks in advance.

dzug

Deleted_User wrote: »

Hi,

Please can you elaborate...

Many thanks in advance.

Pension contributions are deducted from taxable income.

So if you pay sufficient pension contributions to bring your total taxable income to below the 40% threshold, you won't pay 40% tax.