Being clever with a bonus

momo12

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

Dazed_and_C0nfused said:

momo12 said:

Dazed_and_C0nfused said:

momo12 said:

Hi all,

Hoping for some advice on the 'best' way to handle the receipt of a decent bonus at work. 

I live in Scotland, my tax code is S1244LX and so far my taxable income is at £50,230 with 2 pays to go until the end of March. My salary is just over 60k and have received some smaller bonuses through the year. At the moment I sacrifice 7% to pension, my employer matches up to 10%. 

The bonus I'm due to receive in March is going to be circa £15k and is going to be taxable. I'd like to try and get as much as possible of it as take home pay to treat the family. I've tried the salary calculator website but it calculates the tax at 42% for the total of the bonus. Is that right, I'm not sure if I input the data correctly? 

Another aspect I think if need to consider is the high income child benefit charge. 

Any help to navigate what I should do to maximise the amount of take home pay would be greatly appreciated! 
Thanks 

From what you have posted your taxable earnings are going to be in the region of £75k so you could actually be tipping into the new Scottish Advanced Rate of 45% on a little bit of your income.

You will be firmly in HICBC territory.

The most tax efficient option would be sacrifice the large bonus into your pension.  This means you have £15k less income to pay 42/45% tax and NI on but it comes at the cost of having £0 take home pay from the bonus.

It is however a very tax efficient way to add to your pension.

You need to remember to factor in any other taxable income, especially for HICBC purposes.

Contributions to a personal pension or SIPP are also an option but although the end tax (and HICBC) impact will be the same it's more complicated than salary sacrifice.  And you don't avoid any NI.

Hmm, I could increase my pension contributions to ensure that I keep my taxable income below £75k so stay away from that advanced rate like you say. 

I'm fortunate enough that my pension pot is looking ok for now and I'd rather do something with the cash to treat the family this year. So I'd rather not chuck it all into my pension.

Do you know what rate would be applied to the month I get this bonus? Does it all get taxed at 42%?

I don't have any taxable income for HICBC, but having to pay back £2k - I assume through my tax code for the following year - will just be something I'll have to suck up I guess. 

If the earnings are your only income then it looks like you will escape the advanced rate but that £15k is ultimately going to cost you,

£6,300 in income tax
£300 in NI
£2,000 in HICBC (using your figure)

So what could be £15k in your pension is £6,400 in your bank account 😢.

If you aren't paying anything via your tax code towards the HICBC element (which appears to be the case) then that will be determined from your Self Assessment return and be either payable direct to HMRC on 31 January 2026 or, if you file the return early enough and are still earning good money, by a change to your 2026-27 tax code.  I can't see any reason to think you would be paying that back via your tax code for the 2025-26 tax year.

Did you notice the ‘X’ in the tax code? Could be problematic if paid in March - as in more will be collected at 45% as a result!

Would this be corrected in a refund, so doesn't really matter? Or should I try and push the removal of the 'X'?

The ‘X’ means that each month will be treated without reference to any previous months in the tax year. 

In March you will receive £20125. By my reckoning   ,, on that code with the ‘X’ £4178 will be taxed at 45% and 9827 at 48%. 

In that respect it may be worthwhile determining the effect of having the ‘X’ removed and the tax code becoming cumulative. It really depends how much the code was reduced during the year. What was the code previously?

Tax code was S1317M, changed after I informed them that I would no longer be eligible for marriage tax allowance. 

From my rough maths, I think the difference would be a matter of few hundred pounds difference between getting it removed or not?

I think I may give them a call to get it changed if possible, it's literally going to be the last pay for the tax year though. 

Nomunnofun1

momo12 said:

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

Dazed_and_C0nfused said:

momo12 said:

Dazed_and_C0nfused said:

momo12 said:

Hi all,

Hoping for some advice on the 'best' way to handle the receipt of a decent bonus at work. 

I live in Scotland, my tax code is S1244LX and so far my taxable income is at £50,230 with 2 pays to go until the end of March. My salary is just over 60k and have received some smaller bonuses through the year. At the moment I sacrifice 7% to pension, my employer matches up to 10%. 

The bonus I'm due to receive in March is going to be circa £15k and is going to be taxable. I'd like to try and get as much as possible of it as take home pay to treat the family. I've tried the salary calculator website but it calculates the tax at 42% for the total of the bonus. Is that right, I'm not sure if I input the data correctly? 

Another aspect I think if need to consider is the high income child benefit charge. 

Any help to navigate what I should do to maximise the amount of take home pay would be greatly appreciated! 
Thanks 

From what you have posted your taxable earnings are going to be in the region of £75k so you could actually be tipping into the new Scottish Advanced Rate of 45% on a little bit of your income.

You will be firmly in HICBC territory.

The most tax efficient option would be sacrifice the large bonus into your pension.  This means you have £15k less income to pay 42/45% tax and NI on but it comes at the cost of having £0 take home pay from the bonus.

It is however a very tax efficient way to add to your pension.

You need to remember to factor in any other taxable income, especially for HICBC purposes.

Contributions to a personal pension or SIPP are also an option but although the end tax (and HICBC) impact will be the same it's more complicated than salary sacrifice.  And you don't avoid any NI.

Hmm, I could increase my pension contributions to ensure that I keep my taxable income below £75k so stay away from that advanced rate like you say. 

I'm fortunate enough that my pension pot is looking ok for now and I'd rather do something with the cash to treat the family this year. So I'd rather not chuck it all into my pension.

Do you know what rate would be applied to the month I get this bonus? Does it all get taxed at 42%?

I don't have any taxable income for HICBC, but having to pay back £2k - I assume through my tax code for the following year - will just be something I'll have to suck up I guess. 

If the earnings are your only income then it looks like you will escape the advanced rate but that £15k is ultimately going to cost you,

£6,300 in income tax
£300 in NI
£2,000 in HICBC (using your figure)

So what could be £15k in your pension is £6,400 in your bank account 😢.

If you aren't paying anything via your tax code towards the HICBC element (which appears to be the case) then that will be determined from your Self Assessment return and be either payable direct to HMRC on 31 January 2026 or, if you file the return early enough and are still earning good money, by a change to your 2026-27 tax code.  I can't see any reason to think you would be paying that back via your tax code for the 2025-26 tax year.

Did you notice the ‘X’ in the tax code? Could be problematic if paid in March - as in more will be collected at 45% as a result!

Would this be corrected in a refund, so doesn't really matter? Or should I try and push the removal of the 'X'?

The ‘X’ means that each month will be treated without reference to any previous months in the tax year. 

In March you will receive £20125. By my reckoning   ,, on that code with the ‘X’ £4178 will be taxed at 45% and 9827 at 48%. 

In that respect it may be worthwhile determining the effect of having the ‘X’ removed and the tax code becoming cumulative. It really depends how much the code was reduced during the year. What was the code previously?

Tax code was S1317M, changed after I informed them that I would no longer be eligible for marriage tax allowance. 

From my rough maths, I think the difference would be a matter of few hundred pounds difference between getting it removed or not?

I think I may give them a call to get it changed if possible, it's literally going to be the last pay for the tax year though. 

I would get it changed. 

momo12

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

Dazed_and_C0nfused said:

momo12 said:

Dazed_and_C0nfused said:

momo12 said:

Hi all,

Hoping for some advice on the 'best' way to handle the receipt of a decent bonus at work. 

I live in Scotland, my tax code is S1244LX and so far my taxable income is at £50,230 with 2 pays to go until the end of March. My salary is just over 60k and have received some smaller bonuses through the year. At the moment I sacrifice 7% to pension, my employer matches up to 10%. 

The bonus I'm due to receive in March is going to be circa £15k and is going to be taxable. I'd like to try and get as much as possible of it as take home pay to treat the family. I've tried the salary calculator website but it calculates the tax at 42% for the total of the bonus. Is that right, I'm not sure if I input the data correctly? 

Another aspect I think if need to consider is the high income child benefit charge. 

Any help to navigate what I should do to maximise the amount of take home pay would be greatly appreciated! 
Thanks 

From what you have posted your taxable earnings are going to be in the region of £75k so you could actually be tipping into the new Scottish Advanced Rate of 45% on a little bit of your income.

You will be firmly in HICBC territory.

The most tax efficient option would be sacrifice the large bonus into your pension.  This means you have £15k less income to pay 42/45% tax and NI on but it comes at the cost of having £0 take home pay from the bonus.

It is however a very tax efficient way to add to your pension.

You need to remember to factor in any other taxable income, especially for HICBC purposes.

Contributions to a personal pension or SIPP are also an option but although the end tax (and HICBC) impact will be the same it's more complicated than salary sacrifice.  And you don't avoid any NI.

Hmm, I could increase my pension contributions to ensure that I keep my taxable income below £75k so stay away from that advanced rate like you say. 

I'm fortunate enough that my pension pot is looking ok for now and I'd rather do something with the cash to treat the family this year. So I'd rather not chuck it all into my pension.

Do you know what rate would be applied to the month I get this bonus? Does it all get taxed at 42%?

I don't have any taxable income for HICBC, but having to pay back £2k - I assume through my tax code for the following year - will just be something I'll have to suck up I guess. 

If the earnings are your only income then it looks like you will escape the advanced rate but that £15k is ultimately going to cost you,

£6,300 in income tax
£300 in NI
£2,000 in HICBC (using your figure)

So what could be £15k in your pension is £6,400 in your bank account 😢.

If you aren't paying anything via your tax code towards the HICBC element (which appears to be the case) then that will be determined from your Self Assessment return and be either payable direct to HMRC on 31 January 2026 or, if you file the return early enough and are still earning good money, by a change to your 2026-27 tax code.  I can't see any reason to think you would be paying that back via your tax code for the 2025-26 tax year.

Did you notice the ‘X’ in the tax code? Could be problematic if paid in March - as in more will be collected at 45% as a result!

Would this be corrected in a refund, so doesn't really matter? Or should I try and push the removal of the 'X'?

The ‘X’ means that each month will be treated without reference to any previous months in the tax year. 

In March you will receive £20125. By my reckoning   ,, on that code with the ‘X’ £4178 will be taxed at 45% and 9827 at 48%. 

In that respect it may be worthwhile determining the effect of having the ‘X’ removed and the tax code becoming cumulative. It really depends how much the code was reduced during the year. What was the code previously?

Tax code was S1317M, changed after I informed them that I would no longer be eligible for marriage tax allowance. 

From my rough maths, I think the difference would be a matter of few hundred pounds difference between getting it removed or not?

I think I may give them a call to get it changed if possible, it's literally going to be the last pay for the tax year though. 

I would get it changed. 

Sounds fair, with your experience, is this going to be a headache or pretty simple process? Call them up and ask them to reasses my code?

Dazed_and_C0nfused

momo12 said:

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

Dazed_and_C0nfused said:

momo12 said:

Dazed_and_C0nfused said:

momo12 said:

Hi all,

Hoping for some advice on the 'best' way to handle the receipt of a decent bonus at work. 

I live in Scotland, my tax code is S1244LX and so far my taxable income is at £50,230 with 2 pays to go until the end of March. My salary is just over 60k and have received some smaller bonuses through the year. At the moment I sacrifice 7% to pension, my employer matches up to 10%. 

The bonus I'm due to receive in March is going to be circa £15k and is going to be taxable. I'd like to try and get as much as possible of it as take home pay to treat the family. I've tried the salary calculator website but it calculates the tax at 42% for the total of the bonus. Is that right, I'm not sure if I input the data correctly? 

Another aspect I think if need to consider is the high income child benefit charge. 

Any help to navigate what I should do to maximise the amount of take home pay would be greatly appreciated! 
Thanks 

From what you have posted your taxable earnings are going to be in the region of £75k so you could actually be tipping into the new Scottish Advanced Rate of 45% on a little bit of your income.

You will be firmly in HICBC territory.

The most tax efficient option would be sacrifice the large bonus into your pension.  This means you have £15k less income to pay 42/45% tax and NI on but it comes at the cost of having £0 take home pay from the bonus.

It is however a very tax efficient way to add to your pension.

You need to remember to factor in any other taxable income, especially for HICBC purposes.

Contributions to a personal pension or SIPP are also an option but although the end tax (and HICBC) impact will be the same it's more complicated than salary sacrifice.  And you don't avoid any NI.

Hmm, I could increase my pension contributions to ensure that I keep my taxable income below £75k so stay away from that advanced rate like you say. 

I'm fortunate enough that my pension pot is looking ok for now and I'd rather do something with the cash to treat the family this year. So I'd rather not chuck it all into my pension.

Do you know what rate would be applied to the month I get this bonus? Does it all get taxed at 42%?

I don't have any taxable income for HICBC, but having to pay back £2k - I assume through my tax code for the following year - will just be something I'll have to suck up I guess. 

If the earnings are your only income then it looks like you will escape the advanced rate but that £15k is ultimately going to cost you,

£6,300 in income tax
£300 in NI
£2,000 in HICBC (using your figure)

So what could be £15k in your pension is £6,400 in your bank account 😢.

If you aren't paying anything via your tax code towards the HICBC element (which appears to be the case) then that will be determined from your Self Assessment return and be either payable direct to HMRC on 31 January 2026 or, if you file the return early enough and are still earning good money, by a change to your 2026-27 tax code.  I can't see any reason to think you would be paying that back via your tax code for the 2025-26 tax year.

Did you notice the ‘X’ in the tax code? Could be problematic if paid in March - as in more will be collected at 45% as a result!

Would this be corrected in a refund, so doesn't really matter? Or should I try and push the removal of the 'X'?

The ‘X’ means that each month will be treated without reference to any previous months in the tax year. 

In March you will receive £20125. By my reckoning   ,, on that code with the ‘X’ £4178 will be taxed at 45% and 9827 at 48%. 

In that respect it may be worthwhile determining the effect of having the ‘X’ removed and the tax code becoming cumulative. It really depends how much the code was reduced during the year. What was the code previously?

Tax code was S1317M, changed after I informed them that I would no longer be eligible for marriage tax allowance. 

From my rough maths, I think the difference would be a matter of few hundred pounds difference between getting it removed or not?

I think I may give them a call to get it changed if possible, it's literally going to be the last pay for the tax year though. 

I would get it changed. 

Sounds fair, with your experience, is this going to be a headache or pretty simple process? Call them up and ask them to reasses my code?

Call at 8am sharp is recommended.

Explain you want your code issuing on a cumulative basis and understand the consequences of doing that on your next pay day.  They may be resistant at first.

Nomunnofun1

Dazed_and_C0nfused said:

momo12 said:

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

momo12 said:

Nomunnofun1 said:

Dazed_and_C0nfused said:

momo12 said:

Dazed_and_C0nfused said:

momo12 said:

Hi all,

Hoping for some advice on the 'best' way to handle the receipt of a decent bonus at work. 

I live in Scotland, my tax code is S1244LX and so far my taxable income is at £50,230 with 2 pays to go until the end of March. My salary is just over 60k and have received some smaller bonuses through the year. At the moment I sacrifice 7% to pension, my employer matches up to 10%. 

The bonus I'm due to receive in March is going to be circa £15k and is going to be taxable. I'd like to try and get as much as possible of it as take home pay to treat the family. I've tried the salary calculator website but it calculates the tax at 42% for the total of the bonus. Is that right, I'm not sure if I input the data correctly? 

Another aspect I think if need to consider is the high income child benefit charge. 

Any help to navigate what I should do to maximise the amount of take home pay would be greatly appreciated! 
Thanks 

From what you have posted your taxable earnings are going to be in the region of £75k so you could actually be tipping into the new Scottish Advanced Rate of 45% on a little bit of your income.

You will be firmly in HICBC territory.

The most tax efficient option would be sacrifice the large bonus into your pension.  This means you have £15k less income to pay 42/45% tax and NI on but it comes at the cost of having £0 take home pay from the bonus.

It is however a very tax efficient way to add to your pension.

You need to remember to factor in any other taxable income, especially for HICBC purposes.

Contributions to a personal pension or SIPP are also an option but although the end tax (and HICBC) impact will be the same it's more complicated than salary sacrifice.  And you don't avoid any NI.

Hmm, I could increase my pension contributions to ensure that I keep my taxable income below £75k so stay away from that advanced rate like you say. 

I'm fortunate enough that my pension pot is looking ok for now and I'd rather do something with the cash to treat the family this year. So I'd rather not chuck it all into my pension.

Do you know what rate would be applied to the month I get this bonus? Does it all get taxed at 42%?

I don't have any taxable income for HICBC, but having to pay back £2k - I assume through my tax code for the following year - will just be something I'll have to suck up I guess. 

If the earnings are your only income then it looks like you will escape the advanced rate but that £15k is ultimately going to cost you,

£6,300 in income tax
£300 in NI
£2,000 in HICBC (using your figure)

So what could be £15k in your pension is £6,400 in your bank account 😢.

If you aren't paying anything via your tax code towards the HICBC element (which appears to be the case) then that will be determined from your Self Assessment return and be either payable direct to HMRC on 31 January 2026 or, if you file the return early enough and are still earning good money, by a change to your 2026-27 tax code.  I can't see any reason to think you would be paying that back via your tax code for the 2025-26 tax year.

Did you notice the ‘X’ in the tax code? Could be problematic if paid in March - as in more will be collected at 45% as a result!

Would this be corrected in a refund, so doesn't really matter? Or should I try and push the removal of the 'X'?

The ‘X’ means that each month will be treated without reference to any previous months in the tax year. 

In March you will receive £20125. By my reckoning   ,, on that code with the ‘X’ £4178 will be taxed at 45% and 9827 at 48%. 

In that respect it may be worthwhile determining the effect of having the ‘X’ removed and the tax code becoming cumulative. It really depends how much the code was reduced during the year. What was the code previously?

Tax code was S1317M, changed after I informed them that I would no longer be eligible for marriage tax allowance. 

From my rough maths, I think the difference would be a matter of few hundred pounds difference between getting it removed or not?

I think I may give them a call to get it changed if possible, it's literally going to be the last pay for the tax year though. 

I would get it changed. 

Sounds fair, with your experience, is this going to be a headache or pretty simple process? Call them up and ask them to reasses my code?

Call at 8am sharp is recommended.

Explain you want your code issuing on a cumulative basis and understand the consequences of doing that on your next pay day.  They may be resistant at first.

Hopefully my calculations were correct - not at all au fait with Scottish taxation. 

Dazed_and_C0nfused

It is a bit long winded but you can use this calculator to check the tax that would be payable on your next payday if different tax codes were used.

You need to know the taxable pay expected next pay day and details from your latest payslip.

https://www.gov.uk/guidance/work-out-an-employees-income-tax

momo12

Thanks both. I really appreciate the advice. Will call them first thing tomorrow and be clear I want the 'X' removed. 

Dazed_and_C0nfused

momo12 said:

Thanks both. I really appreciate the advice. Will call them first thing tomorrow and be clear I want the 'X' removed. 

Depending on the exact breakdown of your tax code it's possible that removing the X could change the numerical element slightly.  But it is unlikely to make much difference.

But probably worth checking what the actual new code number will be whilst taking to HMRC.

It could be unchanged.

momo12

Just as an update, I spoke to HMRC yesterday - not before 1 hr 30mins on hold! The guy was really helpful to be honest and said he had made the change to my tax code. I got a message this morning to say it had went through - it changed to S1257L. 

Thanks again both

Nomunnofun1

momo12 said:

Just as an update, I spoke to HMRC yesterday - not before 1 hr 30mins on hold! The guy was really helpful to be honest and said he had made the change to my tax code. I got a message this morning to say it had went through - it changed to S1257L. 

Thanks again both

Excellent!!!