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Tax question

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  • Airblower said:
    Month 2 is what concerns me. Am I right in thinking they will take 40% even though it should be 20% as my monthly pay will be back to normal?

    I won't be paying all my bills that month if that's the case. 
    Yes some tax will due at 40% as your earnings at month 2 will be equivalent to over £100k

    Have you tried the calculator yet to see how much the tax will drop in month 2?
  • pavvers
    pavvers Posts: 32 Forumite
    10 Posts
    Airblower said:
    Month 2 is what concerns me. Am I right in thinking they will take 40% even though it should be 20% as my monthly pay will be back to normal?

    I won't be paying all my bills that month if that's the case. 
    That's how I read it but I've only just joined here too so don't take my word for it!

    Have you already got plans for that 11k then?  You could hold a bit back ready for Month 2's bills.  I completely see your position though.
  • Month 1 you would pay £5116.95 in tax.

    Month 2 you would pay £367.58

    The above assumes the emergency tax code (1257L) is in use.
  • chrisbur
    chrisbur Posts: 4,258 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 6 March 2024 at 7:02PM
    pavvers said:
    chrisbur said:
    This would result in paying more national insurance.
    Could you explain why please?  I don't understand!

    Have not studied all the budget details but as far as I can tell NI levels stay the same so UEL remains at £4189 a month
    The OP is on £47700 so £3975 a month.
    So if £11000 added to month 1 then £214 of bonus paid at 8% rest at 2%
    If however it is split over the year then each month £214 of it is charged at 8% and the rest at 2%
    An extra 11 months paying 8% of £214 instead of 2%
    Also you do not have the opportunity to save some of this bonus and get interest on it.
    Also employer might go bust and you never get all the bonus.
  • chrisbur
    chrisbur Posts: 4,258 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 6 March 2024 at 6:55PM
    Airblower said:
    Month 2 is what concerns me. Am I right in thinking they will take 40% even though it should be 20% as my monthly pay will be back to normal?

    I won't be paying all my bills that month if that's the case. 
    No this is not correct in fact the opposite is what happens.  
    Each month your allowances will increase so you get more tax free allowance more 20% band allowance and more 40% and 45% band allowances.
    Because of this as each month comes round some (possibly all) tax you paid at 45% is converted to tax at 40% and some tax you paid at 40% is converted to tax at 20%  
    The result of these taxes going down is that you will pay less tax than you would normally on a salary of £47700.
    As your salary plus bonus probably puts you into the 40% tax band your tax figure will stabilize once all 45% tax has been converted, this will still be lower than "normal" tax on your salary due to the extra tax paid in month 1
  • molerat
    molerat Posts: 34,647 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Airblower said:
    Month 2 is what concerns me. Am I right in thinking they will take 40% even though it should be 20% as my monthly pay will be back to normal?

    I won't be paying all my bills that month if that's the case. 
    An example not taking into account pension deductions, student loan etc, just basic pay. 
    On a monthly gross of £3975, £47700 pa, your take home would be £3155.64 after £582.20 tax.  
    Getting an extra £11K in April would mean a take home of £9391.05 after £5116.95 tax.  
    May take home would be £3373.26 after £367.58 tax. 
    June onwards would be £3198.37 after £542.47 tax. 
    So every month will be more than what you would have received on just the basic salary due to the excess tax in April being drip fed back.

  • Thanks all
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