Tax Free bonuses, or so I thought

mezzor

At Christmas 2015, my boss gave me a £1000 bonus that went on my wage slip as normal that NI and Tax was deducted from, all normal and above board.

In January of this year, my boss tells me that if he makes me a shareholder then he would be able to give me future bonuses Tax and NI free, not only saving the business money as he wouldn't have to contribute to NI but obviously saving me a lot of money on bonuses.

I was subsequently given £50 worth of shares.

Since April this year I have been given monthly bonuses paid separately into my bank, however, my boss has now informed me that at the end of the year, I will have to do a self assessment and will then receive a tax bill which has now left me extremely worried given that all my bonuses have been spent since April.

Can anyone shed any light on this?

Pennywise

New law came in 6/4/16 so now there is a new tax on dividends. First £5k no tax, but then either 7.5% or 32.5% tax on the rest depending on whether you're a basic or higher rate taxpayer.

You may also be caught by other anti-avoidance rule in that the shares you have been given must have full rights - if they have partial rights, i.e. to dividend only with no voting or capital rights, HMRC may charge tax/nic, especially if the amount of dividends you receive are out of proportion to the share value - i.e. it's contrived and not real if you get several thousand pounds of dividends each year for just £50 of shares - not commercial, so a dodge.

mezzor

Pennywise wrote: »

New law came in 6/4/16 so now there is a new tax on dividends. First £5k no tax, but then either 7.5% or 32.5% tax on the rest depending on whether you're a basic or higher rate taxpayer.

You may also be caught by other anti-avoidance rule in that the shares you have been given must have full rights - if they have partial rights, i.e. to dividend only with no voting or capital rights, HMRC may charge tax/nic, especially if the amount of dividends you receive are out of proportion to the share value - i.e. it's contrived and not real if you get several thousand pounds of dividends each year for just £50 of shares - not commercial, so a dodge.

Thank you for your reply - I am a basic taxpayer currently earning between 23,000 and 25,000 (Without bonuses) bonuses have varied from £100 to £400 since April. Would child benefit / tax credits affect the rate of tax I would pay on the bonuses?