Tax on bonus

williamsl5

Hi

Hoping people can help me with tax paid on an annual bonus.

My tax code is 1185l.

So, last year, my annual salary was £36,500 and then effective 1st February 2018 I received a pay rise taking my annual salary to £40,900. I also received an annual bonus of £4,350. On this bonus I paid 20% tax (£870)

Fast forward to this year. I received a pay rise effective on 1st February 2019 to £42,000. My bonus was £4,500 so slightly higher than last year.

What's confusing me with my bonus is that I took away less after tax than last year. The tax paid on this year's bonus was £1,161.40 which is higher than the 20% tax I expected. I guess this is because this has forced me into the higher tax bracket, but still can't work out why a higher bonus means I take home less than a lower bonus last year.

Can anyone help to show me how this has been calculated?

chrisbur

It will be a lot easier if you can give the following figures from each payslip on which the bonus was paid....
Taxable gross
Tax paid
Taxable gross to date
Tax paid to date
Month number or date of payment

Or just this years if last years not handy.

chrisbur

Do you have the month number or date these were paid on.
Is there any non-taxable elements eg pension to come off the gross figures.

williamsl5

Hi
So here are the figures from both 31/01/2018 and 31/01/2019
Both are for month 10

31/01/2018
Total payment - £4,350. Net pay - £3,324.25

Total Gross - £36,068.40
Taxable Pay - £36,068.40
Tax Paid - £5,295.40

31/01/2019
Total payment - £4,500. Net pay - £3,205.22

Total Gross - £39,939.90
Taxable Pay - £39,939.90
Tax Paid - £6,272.80

chrisbur

williamsl5 wrote: »

Hi
So here are the figures from both 31/01/2018 and 31/01/2019
Both are for month 10

31/01/2018
Total payment - £4,350. Net pay - £3,324.25

Total Gross - £36,068.40
Taxable Pay - £36,068.40
Tax Paid - £5,295.40

31/01/2019
Total payment - £4,500. Net pay - £3,205.22

Total Gross - £39,939.90
Taxable Pay - £39,939.90
Tax Paid - £6,272.80

For this year the point at which 40% tax is deducted is £46350 for the full year. As at month 10 it is £38625.00
This means that when this payment was made you were about £1315 into the 40% tax band resulting in an extra £263 in tax being deducted.
Depending on your earnings for the last two months of the year some of this 40% tax will be returned to you but assuming you receive 2/12 of your salary of £42000 you will end with £46939.00 so still about £589 in the 40% band.
Are you in any pension scheme, if so you should look into claiming this extra tax back.

williamsl5

Thank you, that makes a bit more sense!
I am in a company pension scheme. I don't make any AVCs to this myself.
In terms of claiming back any excess tax, how would I do this or will my employer automatically sort it out at tax year end?
Still seems crazy that a bigger bonus means you take home less!

chrisbur

williamsl5 wrote: »

Thank you, that makes a bit more sense!
I am in a company pension scheme. I don't make any AVCs to this myself.
In terms of claiming back any excess tax, how would I do this or will my employer automatically sort it out at tax year end?
Still seems crazy that a bigger bonus means you take home less!

If you mean that you do not contribute anything to your pension it is all paid by your employer, then I do not believe that you will be able to claim any tax back. Best advice regarding your pension will come from your pension provider as they will know the full details of what sort of pension you are in.

Your bonus actually has very little to do with what you call " a bigger bonus means you take home less"
From last year to this year the point at which you pay 40% tax went up by 2.91% your salary as at month 10 went from £36068 to £39939 which is an increase of over 10.70% The salary figures you give for the last two years are £36500 and £40900 which is an increase of just over 12% and your bonus increased by 3.75%
It is your increased earnings overall that have taken you into the 40% tax band, but as I said this 40% tax will reduce over the next two months, based on the new earnings figure you gave.

Also worth remembering that most of your bonus fell above what is called the upper earnings limit so that you paid 2% national insurance instead of 12%. I do not have the exact figures for that month but would guess that you saved about £400 on NI.

williamsl5

Thank you for your really helpful response. I would have had absolutely no idea !