How to plan? Job offer 100k and up to 20% bonus

housestress

Hello, just wanted to get some advice on where to start, I have a new job offer of 100k with then a variable bonus up to 20% paid at the end of the tax year in March. Significant salary difference to my current role and the only benefit I am in receipt of is 30 free hours for my son. Advice welcome please, I have seen lots of forums on the loss of 30 hours childcare, paying into SIPP etc, 60% tax, etc but I don't really understand.

prowla

What's the question?

housestress

Probably just some advice as to what other people do. Should I take actions to avoid 60% tax, is there a way to keep 30 free hours and how does everyone manage tax element when bonus is basically a surprise at the end of the tax year

pjread

Personally that whole 100-127k range is crazy, do whatever you can to avoid it but probably that means throwing anything over 100k in to the pension while you can, but also e.g. if you can buy additional leave etc those kind of things might be options.   even possibly paying the LTA excess charge later is preferable to paying 62% for sure now IMO.  I'd check with employer if you can salary sacrifice the bonus (and whether they'll give you or share with you the employer NI saving from doing so)

Not sure what else I can say without knowing more, we can talk about LISA vs ISA and VCTs/EIS/etc but no idea what's really appropriate for you.

housestress

Thank you, what is LTA please? I am definitely oblivious on the steps to take

silvercar

First calculate what your earning for the tax year 2022-23 are likely to be, if this is a significant increase you may not run into issues this tax year.

housestress

Thank you, yes I agree, this tax year will be fine, its planning for 2023-24

Albermarle

housestress said:

Thank you, what is LTA please? I am definitely oblivious on the steps to take

When you contribute to a pension, you get tax relief. This can be a significant amount, if you are a high earner and contribute a decent % to your pension. To stop people overabusing this generous tax relief, there is a limit on how much you can add each year - the Annual Allowance - £40K and a Lifetime Allowance ( LTA) of £1,073,100 . You can go above this but eventually you will have to pay extra tax . I would not worry about the latter at the moment.

Overall I suggest you get more familiar with tax and pensions and personal finance in general , by reading this forum ( and the Pensions and Savings and Investments forums ) and by general reading/research.
Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)
Free and impartial help with money, backed by the government | MoneyHelper

housestress

Thank you very much, and is it possible to add to the pension annual allowance at the end of the tax year, or this needs to be consistently throughout the year - just thinking of the impact of bonus 

[Deleted User]

housestress said:

Thank you very much, and is it possible to add to the pension annual allowance at the end of the tax year, or this needs to be consistently throughout the year - just thinking of the impact of bonus 

Simplistically, very simplistically, you would pay £16000 into a pension. That would be grossed up to £20000 by HMRC and bring the relevant figure (NSI) down to £100000. That’s a starting point.

housestress

Thank you, and to do this at around bonus time near the end of the tax year?