Witholding Bonus

Jaguar_Skills

Hello again everyone.

I have also added this in the pensions thread as I am not sure whether that is more suitable.

You were all very helpful previously when I had some queries re income/tax/pension payments and things have moved on a little since then.

I am due to be paid my bonus at the end of this month which will be £28k. I realise that I am in a very fortunate position but would still like advice if I may.

I queried with my director whether salary sacrifice is an option as with current wage I am going to get taxed quite heavily. Unfortunately as our workplace pension only came in last year this is not yet an option and he needs to take advice from pension provider St James Place. He has also said he may be able to pay direct into my personal pension but also needs to take advice on this.

The suggestion was whether I wanted to take all my bonus this month or withhold it so that I can invest it into the workplace pension when salary sacrifice becomes an option. It is all very confusing working out how much nett pay I will get etc so wondered if anyone can give some options/advice?

My inclination is to take the full bonus this time around, as we are having our first baby and would be good to have higher cash reserve then utilise the salary sacrifice as and when it comes into force. This is also relevant as if I withold bonus, I lose company contribution to my pension. My financial stats are below, which I guess are important for people to advise:

Gross Salary £52,917
September 2016 Bonus £16,500
March 2017 Bonus £28,000

Total = £94,417

Workplace pension:

From Apr 2016 - Employer 1%, Employee 0.8% Net

From Oct 2017 Employer 3%, Employee 1.6% Net

From Oct 2018 Employer 5%, Employee 1.6%

Does anyone have any useful advice about options this month as I have to let him know in the next couple of days?!?!?!

badmemory

You may be better posting this on the pension forum. But my totally uninformed suggestion would be to get a SIPP before the end of the tax year on 5th April.

As an aside to the pension thing - just because you cannot actually receive child benefit does not mean that your OH cannot get pension credits which the child benefit would normally ensure. Also even whilst not earning she can put £2880 into her pension which is rounded up to £3600 & would help to spread your future (as in retired) tax liabilities.

TadleyBaggie

badmemory wrote: »

You may be better posting this on the pension forum.

They have done, as they said above

I have also added this in the pensions thread as I am not sure whether that is more suitable.

badmemory

Which I later found and have also commented so win-win

Jaguar_Skills

badmemory wrote: »

You may be better posting this on the pension forum. But my totally uninformed suggestion would be to get a SIPP before the end of the tax year on 5th April.

As an aside to the pension thing - just because you cannot actually receive child benefit does not mean that your OH cannot get pension credits which the child benefit would normally ensure. Also even whilst not earning she can put £2880 into her pension which is rounded up to £3600 & would help to spread your future (as in retired) tax liabilities.

Are you able to elaborate on the above? Sorry really not very good with tax information. How did the £2880 equate to £3600?

badmemory

Even a non-taxpayer can pay £2880 into a pension and have the tax (even though unpaid) added back on. As a nontaxpayer you can put more into a pension but you wouldn't get credited with any more tax. Sorry - not very good at explaining things!

Dazed_and_confused

2880 + basic rate tax relief (currently 20%) = 3600