Tax on one off bonus

Bigal350

Hi looking for some help understanding the tax I paid on one off bonus  I get paid weekly and my normal pay is around £800 a week and my yearly is around £38000  tax code is 1263L my  normal tax deduction is around £105 a week  On week 31 I received a retirement and loyalty bonus   which took my pay  for that week to £28,311  I paid £9590 in tax   which seems a lot to me around 30% and my earnings up to that period went up to  £49,924  The following week my pay went back to normal £790 week 32 but  this pushed me into the next tax  rate  of 40%  as my earnings were over £50270 but I only paid £75 in tax   So my question is is the amount of tax I paid on week 31 correct and why has the amount of tax dropped since then  thanks in advance for any help provided alan 

Dazed_and_C0nfused

Bigal350 said:

Hi looking for some help understanding the tax I paid on one off bonus  I get paid weekly and my normal pay is around £800 a week and my yearly is around £38000  tax code is 1263L my  normal tax deduction is around £105 a week  On week 31 I received a retirement and loyalty bonus   which took my pay  for that week to £28,311  I paid £9590 in tax   which seems a lot to me around 30% and my earnings up to that period went up to  £49,924  The following week my pay went back to normal £790 week 32 but  this pushed me into the next tax  rate  of 40%  as my earnings were over £50270 but I only paid £75 in tax   So my question is is the amount of tax I paid on week 31 correct and why has the amount of tax dropped since then  thanks in advance for any help provided alan 

In the week you got the bonus a lot of your pay would have fallen into the 40% band.

The next week, when you earned £790 you didn't use all of your basic rate band available for that week so you effectively got a "refund" of some of the 40% tax you paid the week before. 

Instead of being an actual refund it reduces the tax you had to pay that week.

El_Torro

As I understand it if you get a one off lump sum then HMRC basically assume you're going to continue to get that lump sum for the rest of the financial tax year and tax you lots accordingly. Then if that extra money doesn't materialise HMRC tax you less in future payslips to compensate for the tax you have already overpaid. 

Bigal350

Dazed_and_C0nfused said:

Bigal350 said:

Hi looking for some help understanding the tax I paid on one off bonus  I get paid weekly and my normal pay is around £800 a week and my yearly is around £38000  tax code is 1263L my  normal tax deduction is around £105 a week  On week 31 I received a retirement and loyalty bonus   which took my pay  for that week to £28,311  I paid £9590 in tax   which seems a lot to me around 30% and my earnings up to that period went up to  £49,924  The following week my pay went back to normal £790 week 32 but  this pushed me into the next tax  rate  of 40%  as my earnings were over £50270 but I only paid £75 in tax   So my question is is the amount of tax I paid on week 31 correct and why has the amount of tax dropped since then  thanks in advance for any help provided alan 

In the week you got the bonus a lot of your pay would have fallen into the 40% band.

The next week, when you earned £790 you didn't use all of your basic rate band available for that week so you effectively got a "refund" of some of the 40% tax you paid the week before. 

Instead of being an actual refund it reduces the tax you had to pay that week.

So if I understand  what you are saying  dazed and confused the tax I paid is correct then   I am still only paying around £70 tax a week   Since the bonus  I hope I won’t  end up at the end of the tax year with a bill from the taxman

[Deleted User]

Bigal350 said:

Dazed_and_C0nfused said:

Bigal350 said:

Hi looking for some help understanding the tax I paid on one off bonus  I get paid weekly and my normal pay is around £800 a week and my yearly is around £38000  tax code is 1263L my  normal tax deduction is around £105 a week  On week 31 I received a retirement and loyalty bonus   which took my pay  for that week to £28,311  I paid £9590 in tax   which seems a lot to me around 30% and my earnings up to that period went up to  £49,924  The following week my pay went back to normal £790 week 32 but  this pushed me into the next tax  rate  of 40%  as my earnings were over £50270 but I only paid £75 in tax   So my question is is the amount of tax I paid on week 31 correct and why has the amount of tax dropped since then  thanks in advance for any help provided alan 

In the week you got the bonus a lot of your pay would have fallen into the 40% band.

The next week, when you earned £790 you didn't use all of your basic rate band available for that week so you effectively got a "refund" of some of the 40% tax you paid the week before. 

Instead of being an actual refund it reduces the tax you had to pay that week.

So if I understand  what you are saying  dazed and confused the tax I paid is correct then   I am still only paying around £70 tax a week   Since the bonus  I hope I won’t  end up at the end of the tax year with a bill from the taxman

There shouldn’t. PAYE is calculated in such a way that tax is paid on a projected salary for the year based on payments made to date. Clearly the bonus skewed this somewhat. As this projection reduces (you won’t receive another bonus) the tax overpaid is gradually refunded over the remainder of the tax year. 

On the plus side you saved some NIC, paying 2% on a good part of the bonus as opposed to the full rate. 

chrisbur

Bigal350 said:

Dazed_and_C0nfused said:

Bigal350 said:

Hi looking for some help understanding the tax I paid on one off bonus  I get paid weekly and my normal pay is around £800 a week and my yearly is around £38000  tax code is 1263L my  normal tax deduction is around £105 a week  On week 31 I received a retirement and loyalty bonus   which took my pay  for that week to £28,311  I paid £9590 in tax   which seems a lot to me around 30% and my earnings up to that period went up to  £49,924  The following week my pay went back to normal £790 week 32 but  this pushed me into the next tax  rate  of 40%  as my earnings were over £50270 but I only paid £75 in tax   So my question is is the amount of tax I paid on week 31 correct and why has the amount of tax dropped since then  thanks in advance for any help provided alan 

In the week you got the bonus a lot of your pay would have fallen into the 40% band.

The next week, when you earned £790 you didn't use all of your basic rate band available for that week so you effectively got a "refund" of some of the 40% tax you paid the week before. 

Instead of being an actual refund it reduces the tax you had to pay that week.

So if I understand  what you are saying  dazed and confused the tax I paid is correct then   I am still only paying around £70 tax a week   Since the bonus  I hope I won’t  end up at the end of the tax year with a bill from the taxman

If you do it will be for another reason eg. untaxed interest, or if your payday falls on a Saturday which would trigger a week 53.