Commision

trudy1980

Hi I hope someone can help me understand. 

I started a new job in September as a BDM I have a basic salary of £35k pa and am entitled to a non capped commission payment next October for all new contracts I bring into the business.

I have never worked on commision before so need a little help understanding. 

From the work I have already done and what is in the pipeline I am guessing the payment will be upwards of 20k

Asuming it is 20k this will push my earnings for the year to £55k meaning that I would be in the higher rate tax bracket. How will this effect my take home pay and child benefit etc... As the following year my commission could be a lot less meaning I would be a standard rate tax payer.

Sorry if I'm being dumb 

SiliconChip

Assuming you have a standard £12570 personal allowance then you'll pay 40% tax on any income over £50270, in your case that's likely to mean you're paying a lot of tax in October 2023 then lower amounts to March 2024. You should benefit by paying less National Insurance for a large one-off payment than you would if the commission was spread over multiple pay periods (most of it will be subject to the 2% rate rather than 12%).

You will have to pay the High Income Child Benefit Charge, look here to decide how best to approach this https://www.gov.uk/child-benefit-tax-charge 

As for the 2024-25 tax year, you may find that your personal allowance is adjusted on the assumption that your gross salary will remain above the Higher Rate threshold, if your commission is actually lower then you can request adjustments through your personal tax account.

Marcon

trudy1980 said:

Hi I hope someone can help me understand. 

I started a new job in September as a BDM I have a basic salary of £35k pa and am entitled to a non capped commission payment next October for all new contracts I bring into the business.

I have never worked on commision before so need a little help understanding. 

From the work I have already done and what is in the pipeline I am guessing the payment will be upwards of 20k

Asuming it is 20k this will push my earnings for the year to £55k meaning that I would be in the higher rate tax bracket. How will this effect my take home pay and child benefit etc... As the following year my commission could be a lot less meaning I would be a standard rate tax payer.

Sorry if I'm being dumb 

See https://www.moneysavingexpert.com/tax-calculator/ and enter your projected salary for the whole tax year 2023-24 to give you a rough idea of the annual impact, albeit your NI, as the post above points out, will be overstated because a large chunk will be payable in just one month (October) rather than spread throughout the year. The calculator has a drop-down box so you could also do a calculation for just the one 'bumper' month of October to give you an idea of how much tax and NI will be deducted that month.

In respect of child benefit, there's a good explanation here: https://www.turn2us.org.uk/Benefit-guides/Child-Benefit/High-income-Child-Benefit-tax-charge. It may be worth considering making extra pension contributions, charitable donations (if you can afford to do so) to bring your adjusted income down to below the £50K mark.