Self assessment - bonuses

planforfuture

Please advice 🙏 

I retired from work in Sept 2022 and was a 40% tax band taxpayer. Then in June 2023 (I.e in. FY 2023 -24) i received a bonus of ard £3000 (after 40% tax deduction from £5000) from that previous employment. Think my last employer used my previous tax code I.e with 40% tax rate band.

For FY 2023-24,  I haven't yet received any income apart from this £3k bonus payout and I will start taking funds from my SIPP within this FY. My approach for this FY is to minimise my income tax I.e. taking £16760 (I.e. 25%=£4190 is tax free and £12570 is the current personal allowance for zero tax.

Please advice is the above still valid taking into account that I have already paid tax (40% !!!) for the bonus (as income). Or I need to deduct the £3000 income from £16760 i.e. to £13760. And how to I claim back the £1000 tax the IR has overcharged me in the self assessment tax form.

Thanks in advance for your help.

Dazed_and_C0nfused

planforfuture said:

Please advice 🙏 

I retired from work in Sept 2022 and was a 40% tax band taxpayer. Then in June 2023 (I.e in. FY 2023 -24) i received a bonus of ard £3000 (after 40% tax deduction from £5000) from that previous employment. Think my last employer used my previous tax code I.e with 40% tax rate band.

For FY 2023-24,  I haven't yet received any income apart from this £3k bonus payout and I will start taking funds from my SIPP within this FY. My approach for this FY is to minimise my income tax I.e. taking £16760 (I.e. 25%=£4190 is tax free and £12570 is the current personal allowance for zero tax.

Please advice is the above still valid taking into account that I have already paid tax (40% !!!) for the bonus (as income). Or I need to deduct the £3000 income from £16760 i.e. to £13760. And how to I claim back the £1000 tax the IR has overcharged me in the self assessment tax form.

Thanks in advance for your help.

You don't need to deduct anything 

But if you want to limit your taxable non savings non pension income to £12,570 then you have already had £5,000 so not sure why you think £3,000 is relevant?

And if your total taxable income was £12,570 and you hadn't applied for Marriage Allowance then why would you expect a £1,000 refund 🤔

There is nothing for you to "claim".  If you complete a tax return then just fill it in correctly and provide details of the bank account you want any overpaid tax to be refunded to.

And obviously check your Self Assessment calculation is correct before submitting the return.  Although it's not clear from what you have posted why you would need to complete a tax return?

eskbanker

planforfuture said:

For FY 2023-24,  I haven't yet received any income apart from this £3k bonus payout and I will start taking funds from my SIPP within this FY. My approach for this FY is to minimise my income tax I.e. taking £16760 (I.e. 25%=£4190 is tax free and £12570 is the current personal allowance for zero tax.

Please advice is the above still valid taking into account that I have already paid tax (40% !!!) for the bonus (as income). Or I need to deduct the £3000 income from £16760 i.e. to £13760.

If you've already received £5K of taxable income and want to calibrate your SIPP access to avoid any tax then you need to adjust the taxable element to £7570, which corresponds to a tax-free component of £2523, i.e. total of £10093.

The fact that you paid £2K on that bonus income is a separate matter, but you can sort that out later on....

planforfuture

Please advice how to 'sort that out later'?

Dazed_and_C0nfused

planforfuture said:

Please advice how to 'sort that out later'?

Do you need to complete a tax return or not?

[Deleted User]

If you make a self assessment return for 2023/24 the gross amount of the bonus £5000 and the tax deducted £2000 should be entered as income from employment and tax deducted from it.

Provided you enter other taxable income and any tax deducted from it correctly then your tax liability for the year is calculated (by you) and any tax overpaid will be refunded by HMRC.

If you aren't in self assessment for 2023/24 HMRC will calculate your liability from all sources and make a calculation of your tax liability for the year and refund any tax overpaid.

Either way you will have to wait until after 6 April 2024 and the bonus won't be looked at in isolation.

planforfuture

Thanks.  Since my capital gains and dividend for Fy 2023-24 will exceed the allowance threshold, am I right that  I need to submit self assessment to declare the tax I owe HMRC..I haven't done a self assessment for many years.

[Deleted User]

Possibly, you may need to reactivate your self assessment account to make a self assessment return for 2023/24. 

Do you mean because the amounts of capital gains and dividend income will cause your total income to exceed £12570?

There is an exemption to set against capital gains before tax is due and an amount of savings and investment income which attracts tax at 0%.

Also, depending on the type and amount of capital gain you may need to report it within and pay the tax due within 60 days of disposing of the asset.

eskbanker

planforfuture said:

For FY 2023-24,  I haven't yet received any income apart from this £3k bonus payout and I will start taking funds from my SIPP within this FY. My approach for this FY is to minimise my income tax...

planforfuture said:

my capital gains and dividend for Fy 2023-24 will exceed the allowance threshold...

I'd suggest that it would be worth sharing more detail about all of your expected income for the tax year, as some of the earlier comments (certainly mine) would have been based on the impression that your taxable income would only comprise the bonus and SIPP withdrawals....

planforfuture

I will have £14244 captial gain by selling my US shares where I have already also paid 15% tax via W-8BEN. Since captial gain allowance for this tax year has been reduced to £6000 hence the £8244:capital gain is taxable @10%.

I also will receive £2304 dividends from my GIA (in US and in UK). Since the dividend allowance has been reduced to £1000 this tax year (2023-24) hence £1304 is taxable @8.75%.

The above calculation is based on my to be received income of £10093 from my SIPP (via FAD or UFPLS) this FY as described earlier.

[Deleted User]

You will need to make a return for 2023/24 so your tax liability is correctly calculated including the tax due on the capital gains and dividends.

You maybe entitled to credit for foreign tax already deducted from the capital gain, but I believe it will be restricted to the UK tax due on the gain.

If you want the bonus and dividends to be covered by the personal allowance, so that no income tax is due you will need to adjust the SIPP withdrawal to £8354 so the taxable element is £6266.