Bonus and how it's taxed

30andcounting

Hi

Current salary is £103,200, I'm due a £19K bonus in Oct - I currently pay some into my pension but not astronomial amounts as my employer pension is generous and I'm early 30s. I know I start to lose my PA over £100K so the 19K will be taxed at some hideous amount of 60 odd %, wil my tax code be affected in Oct or will it change from Nov onwards? I was wondering if I will get taxed at my current rate of 40% on this bonus, or not, then pay the additional tax due via my tax code between now and April 2023.

If anyone has experiences similar, please let me know. Looked at putting it into my penion and no, not with the current cost of living crisis.

Thanks

Dazed_and_C0nfused

Your tax code won't change just because you get a sudden increase in pay.

You can update your estimated earnings from this employer on your Personal Tax Account or pay the additional tax due later via Self Assessment.

Either way you will have to complete a Self Assessment return but you may prefer to keep things as accurate as possible during the year.

30andcounting

Dazed_and_C0nfused said:

Your tax code won't change just because you get a sudden increase in pay.

You can update your estimated earnings from this employer on your Personal Tax Account or pay the additional tax due later via Self Assessment.

Either way you will have to complete a Self Assessment return but you may prefer to keep things as accurate as possible during the year.

Thanks - I already do a self assessment return (well my accountant does) so presume it will need to be paid at a later date...

Grumpy_chap

30andcounting said:

Hi

Current salary is £103,200, I'm due a £19K bonus in Oct - I currently pay some into my pension but not astronomial amounts as my employer pension is generous and I'm early 30s. I know I start to lose my PA over £100K so the 19K will be taxed at some hideous amount of 60 odd %, wil my tax code be affected in Oct or will it change from Nov onwards? I was wondering if I will get taxed at my current rate of 40% on this bonus, or not, then pay the additional tax due via my tax code between now and April 2023.

If anyone has experiences similar, please let me know. Looked at putting it into my penion and no, not with the current cost of living crisis.

Thanks

Your salary, while very generous, is just about the worst level it could be for the personal allowance taper which affects the band £100k to £125k.
You'll be earning £103k + £19k = £122k so suffering nearly all the maximum pain with none of the relief that would start to apply if you had gone far beyond the £125k threshold. 
If I understand correctly, on that £22k, you will actually pay 60% income tax plus 3.25% NI (in most cases) so the total deduction is a crucifying 63%.  Take home extra £8k.
As a high earner, cost of living impacts are generally a lower proportion that for low earners.  If you can use SS to make extra pension contributions, for a cut now of £8k, you can put extra £22k into pension (contribution limits permitting).  It might be worth assessing again.
Alternatively, you could avoid the tax pain by making Gift Aid donations.

pjread

+1 to what Grumpy_chap says - if you can put enough in the pension to keep adjusted net income to £100k for the tax year, it's almost certainly the best choice.