Calculating tax on bonus - confused

lawlie

Hello,

I am being paid my bonus this month and confused on why it is so high according to the online salary calculators.

I am a higher rate tax payer.

My bonus is £12k.

According to the calculators, I will be paying an extra £6799.60 in tax, and £240 in national insurance!

This is obviously just under 60% of the actual bonus amount so I'm a bit gobsmacked. How is that broken down? I had, perhaps naively, assumed that it would be 40% on the bonus plus NI.

lawlie

Eugh I've figured it out. Appreciate it's a first world problem but I didn't realise my tax allowance reduces once you go over a threshold, by a £1 for every £2 over that threshold...

Your_Hero

You could speak to your employer and see if they are willing/able to pay that into your pension with them instead. This arrangement would be more tax-efficient.

lawlie

Thanks. I do need the cash though as we are buying a house so just going to have to take it the way it is, albeit not so efficient in tax.

Shows what I know about tax though!!!

chrisbur

lawlie wrote: »

Hello,

I am being paid my bonus this month and confused on why it is so high according to the online salary calculators.

I am a higher rate tax payer.

My bonus is £12k.

According to the calculators, I will be paying an extra £6799.60 in tax, and £240 in national insurance!

This is obviously just under 60% of the actual bonus amount so I'm a bit gobsmacked. How is that broken down? I had, perhaps naively, assumed that it would be 40% on the bonus plus NI.

Forget tax calculators the only way to work out the tax you will pay is if you give your tax code details of pay and tax to date up to your last payslip and the expected total taxable gross for the upcoming payment that will include the bonus. This will not be the end of it though as I would assume your earnings will then go back to normal so quite possibly you will then get back some of the tax you paid, for an idea of this would then need to give an estimate of your future earnings.

To use most tax calculators you do need to understand how tax works, as sometimes they will give the wrong answer.

zygurat789

Suarez wrote: »

The tax should be £4000 then 12% for NI so £1440.

You're YTD figures might affect this though and whether your earining have changed at all since April.

That should have been £12,000 @ 40% = £4,800 and 2% NI = £240, but it appears that the OP is earning at the rate of in excess of £88,000 pa and is effectively paying 60% on part of the bonus.
If total income for the whole year to 5 April 2015 will be greater than £100,000 then a pension payment would be a good idea.