Should my bonus have been taxed at 40%

[Deleted User]

chrisbur said:

You have not paid any tax at 40% it just seems like you paid a lot.  Your normal wage has allowances for tax NI and student loan on which nothing is paid.  When you get extra eg. a bonus these allowances are used up so you pay 20% on all of your bonus, 12% on most of your NI and from memory 9% student loan on all of it.  Tax on a rough calculation would normally be £377 and with the bonus would be £777 that is £400 more which is 20% of the £2000

Indeed - those deductions add up to 41%. The op has received an additional £1180 despite receiving a bonus of £2000. It can seem to be too little when one is expecting £2000.

Fionaanne141

That’s my thoughts too but i’m not great with numbers and work in a creative role so always assume i’m in the wrong where £££ is concerned. My usual take home pay is £1664(ish) and on this occasion it’s only £1180 higher when I was awarded a 2k bonus which is outlined in another section of the pay slip? I thought I was going mad but to me that’s a sizeable tax chunk out of the bonus allocation.

I didn’t want to query with my payroll dept and risk looking like a numpty as we’re a small (close friends) company and payroll dept is only one person who’ll rip the ***** out of me if i’d clearly misunderstood how tax / bonuses work 🤣

chrisbur

Fionaanne141 said:

That’s my thoughts too but i’m not great with numbers and work in a creative role so always assume i’m in the wrong where £££ is concerned. My usual take home pay is £1664(ish) and on this occasion it’s only £1180 higher when I was awarded a 2k bonus which is outlined in another section of the pay slip? I thought I was going mad but to me that’s a sizeable tax chunk out of the bonus allocation.

I didn’t want to query with my payroll dept and risk looking like a numpty as we’re a small (close friends) company and payroll dept is only one person who’ll rip the ***** out of me if i’d clearly misunderstood how tax / bonuses work 🤣

It appears that you have 4 deductions from your salary.  Your normal salary has used up all the allowances so they are applied to the bonus in full
Tax   This is 20% on all of your bonus so £400
NI  This is 12% up to £4167 and 2% after that So £4417 salary less the £4167 is £250 This gives you 12% on £1750 and 2% on £250 of your bonus That is £215 all together
Student loan  This is 9% so £180
Grand total so far £795
This would give a net difference of £2000 less £795 = £1205
Figures may have been rounded a bit.
Then there is the company pension.  I cannot work this out without knowing more details but as you say the net difference is £ 1180 this would appear to be the pension.  This surprises me as I expected to see a higher pension figure.  I am not well acquainted with pension details these days as I left payroll before most of the pensions that are now around had started.  I do know that there is some sort of maximum and assume that this has been applied.  
A better check can be done if you want to gave gross tax NI pension for payslips with bonus and last one before bonus.

Strictly speaking the tax element of the deductions from your bonus are only the first two ie tax and NI which are £615 or 30.75%
Many would pay 32% in tax and NI but yours is reduced slightly by the reduced NI due to going over the upper earnings level.  
The other deductions are strictly speaking still your money as they go towards paying off your student loan and adding to your pension pot, though I do appreciate this seems a big deduction, it is the normal sort of figure everyone faces (apart from the student loan which affects fewer people) for any increase to normal wages from a big bonus to a bit of overtime.

[Deleted User]

Generally bonuses are not pensionable income on company pension schemes chrisburgh. Only tax, NI and student loan would be deducted as you have stated.

chrisbur

[Deleted User] said:

Generally bonuses are not pensionable income on company pension schemes chrisburgh. Only tax, NI and student loan would be deducted as you have stated.

Had another look at the figures given by the OP.  The pension for ees and ers to date are the same £456.69 and the ers figure for month 4 is £166.68 so if there was no pension on the bonus then total ers would be 4 times £166.68 but its £456.69
If we assume that there is extra deducted from month 4 we have £456.69 less £166.68 for months 1 to 3 This gives £290.01 which suggests a pension deduction for those months of 4%
So we have 4% of 2416.67 = 96.67 for 3 months = £290.01
Then for month 4 we have let us say 4% of £4167.00 = £166.68
We have total to date of £456.69
The £4167.00 being the NI upper earnings limit

I have no idea if this is the correct procedure or not but I cannot see any other way to arrive at the figures quoted for pension.

Fionaanne141

Thanks for all your replies. Should I raise this with payroll / HMRC or have I been taxed correctly? Apologies for being so thick! 

chrisbur

Fionaanne141 said:

Thanks for all your replies. Should I raise this with payroll / HMRC or have I been taxed correctly? Apologies for being so thick! 

Your tax is 100% correct to the penny.  Your national insurance and student loan appear correct as far as I can check them without seeing details of last couple of payslips but on the details I have seen they could only be a tiny bit out and I would be very very surprised if they were not 100% correct.
Regarding the company pension, as said before, my knowledge here is very  limited.  I do not know if a deduction for this should have been made or if it should if the deduction is correct.  Indeed my calculation of that deduction is not 100% guaranteed, the explanation I gave is just the only one I can see that fits the details I have.  However assuming that a £70 deduction was made this will have been paid into your pension account, there will be tax repaid added to that and your employer has also matched that payment so rightly or wrongly you will have benefited from this. 
Purdyoaten2 may be able to offer some advice on this.
There is no doubt that you have had a large chunk taken out of your bonus and for anyone not well acquainted with payroll it will have come as a shock, but this happens to everyone and as far as I can see you have been paid correctly.  Again with the proviso that I know little about the pensions these days.  

Fionaanne141

Ahhh thats good to know it's correct! It's reassuring as like you say, it felt like a big deduction from a 2k bonus but I appreciate that's just how it works. Thanks again