Tax & NI on bonus

chrisbur

The correction to tax will start the month after the bonus is paid.  Some of the higher rate tax will be converted to 20% tax each month.  Very rough figures the correction will complete around Oct/Nov.  You will see what appears to be an increase in your tax as you run out of 40% tax being converted to 20% tax, usually this happens over two months.

chrisbur

DE_612183 said:

teeej97 said:

Thanks for the replies all. So it appears that once PAYE realises I have overpaid, my tax for the rest of the year will be reduced to gradually repay me. I do not think my monthly tax will be enough to repay the full overpayment, I assume any balance will be dealt with as a rebate at the end of the tax year? 

Seems like a more sensible position would be for a full rebate to be made as soon as they realise there has been an overpayment and then I continue to pay tax for the rest of the year. As it stands I will be missing months' of interest on that bonus as HMRC will have around £5k of tax to repay! 

I don't think it will that much.

If your salary is £30k and the payment is £13k, the threshold is £37,700 - so that is £5300 taxed at 40% rather than 20%. so a tax bill of £1,060 to repay - assuming you don't have any other income to take into account...

The £37700 is the size of the 20% tax band you need to also add on the tax allowance usually £12570 (In practise about £9 higher for PAYE)