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Earnings of £114k this year need advice

Bmac2010
Posts: 5 Forumite
in Cutting tax
Hi all, this year I have been blessed and incredibly fortunate to be getting a fantastic bonus at Christmas which will take my earnings for the financial year up to around £115k. A similar person in my position has said that I will get slapped with a tax bill to pay after April 1st 2018 and should do a self assessment as I would lose all my tax allowance or something like that.
My basic salary is 50k per year and have had some 1/4 bonus but after my Xmas bonus and counting that I'll still be employed next year come new tax year I will earn around £115k!
What do I do? I just presumed I would pay more tax, currently on 40% but with a big bonus would it not just be more tax? And would I need to keep some back for a bill that will come in april? Called HMRC who where not very helpful and just said that I will get taxed as normal at 40% and won't have to pay any more, but some friends who made this kind of bonus last year said they got hit with a bill the following tax year.
Any advice would be helpful so I can work out my options pls and if it will affect how much tax I pay next year etc
Thanks
My basic salary is 50k per year and have had some 1/4 bonus but after my Xmas bonus and counting that I'll still be employed next year come new tax year I will earn around £115k!
What do I do? I just presumed I would pay more tax, currently on 40% but with a big bonus would it not just be more tax? And would I need to keep some back for a bill that will come in april? Called HMRC who where not very helpful and just said that I will get taxed as normal at 40% and won't have to pay any more, but some friends who made this kind of bonus last year said they got hit with a bill the following tax year.
Any advice would be helpful so I can work out my options pls and if it will affect how much tax I pay next year etc
Thanks
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Comments
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You have told us that your gross income will be £115K. But you do not pay tax on pension contributions made out of gross income, or on some job related expenses. Can you tell us what you think your taxable income will be?
If your taxable income will be more than £100K then making additional pension contributions, perhaps in a SIPP, can make financial sense- if it brings you out of the supertax zone where you start losing personal allowance.0 -
Have a read of this
https://www.gov.uk/income-tax-rates/income-over-100000
As Ray says you can mitigate this by increasing pension contributions. Do you have taxable benefits such as company car, medical etc?0 -
... some friends who made this kind of bonus last year said they got hit with a bill the following tax year.
This article has a good description of how this nonsensical indignity operates, and how best you might avoid it.0 -
Hi. So the only thing I pay off my salary is pension contribution, I get no expenses etc, so my salary of 48k per year works out as £3719 (13 payments per year as work on 13 four weekly periods) and my pension contribution is like £40 a month. But this is on the tax line and not the gross part.
If I didn't want to put extra towards pension contribution I am just trying to work out how much extra tax I'll pay on my bonus in December which is looking like £70k, or how much would the tax man take as extra? I'll have a read over he links attached thanks0 -
If your gross taxable income is £115k then you are looking at a £3k additional tax bill. Your pension contributions are low so you could put £15k into another pension or your current one to avoid this bill.
Also from July this year HMRC will adjust your tax code to take this money in advance. I'm just getting my head round this as in the same boat but can't max pension as already approaching LTA. Tax sucks!!!Smile and be happy, things can usually get worse!0 -
Ok thanks for the info, so the 3k tax bill would this be paid in one go? (So I know to have it ready) or does my tax code change for the year and just pay more tax?
Thanks0 -
If you earn and pay tax on £115K your total deductions including tax and NI will be £43,519.
https://listentotaxman.com/115000?
But as you pay £4K into your pension, you will only be taxed on £111K and will pay £41K. (net income £70K)
If you choose to pay £11K into a SIPP, two good things will happen.
First you will only be taxed on £100K, so will pay £34K (net income £66K)
Then your SIPP will be credited with 40% of the £11K you have contributed, making it up to £16K
So you have the choice of £70K in hand, or £66K in hand plus £16K in a SIPP
This is just an illustration, I do not know your exact situtation, but it looks like your choices could end up making you £12K wealthier or poorer so you should look into it, possibly seeing an IFA if necessary.0 -
Ok thanks for the info, so the 3k tax bill would this be paid in one go? (So I know to have it ready) or does my tax code change for the year and just pay more tax?
Thanks
Previously you just had to have the money ready , this year things have changed and when they see you are likely to bust the 100k they will start to adjust your tax code to recoup the money straight away. This is messing with my head just now as I don't understand what they are doing I.e are the clawing back all due in the remaining months till the tax year or something else.Smile and be happy, things can usually get worse!0 -
if you can afford to make a pension contribution of £14,000 gross to bring your gross salary to £100k anything over 100k will reduce your personal allowance by £1 for every £2 you earn over this amount0
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