100K Threshold help/ Childcare

FennecFox2

Hello, thank you in advance for any wisdom you can share!

Here's my situ:
I have a salary of 100k
I contribute regularly to my workplace pension (5%)
My PAYE record on the HMRC app is 7981 per month = 95,772 

I claim 30 hours free childcare and also tax free childcare for a child in nursery, and wraparound for a child in school. Nursery fees are 98 per day so the 30 free hours is well worth it!

Anyway I digress! I am in the services industry and therefore bonuses aren't really a thing, However I have just been told I will be receiving a bonus of 8,500 - to be paid 4th April. With a 2.5k pay rise to be paid from 1st April (first salaried end of April)

A couple of questions:
1. Will my bonus fall into 24/25 tax year and my salary increase fall into 25/26 tax year?
2. If so, I assume that based on my 5 % pension I will still fall below the threshold of 100k in 25 / 26 with my pay rise of 2.5 k (and assuming no bonus next year (although I wont need nursery at that point anyway)) - Is this correct?
3. And also I assume if my bonus falls into 24/25 then I just add the 8.5k to my taxable income of 95,772 (as per my HMRC app) = 104,272 - so basically do I need to contribute 4,272 to charity and my work pension in order to keep my childcare for the month? I would ideally like to send 1k to a charity I support, 3,272 into my pension and then have the rest - is this the most efficient way of doing it?

Is there anything else I need to do or consider? 

steves_uk

You’re thinking along the right lines.

The tax year runs 6th April -> 5th April, any income (including savings interest when not in a wrapper) need to be declared on your self assessment for tax purposes.

From your description:
1. Bonus will fall within THIS tax year.
2. Pay rise will not (because the income is paid in the following tax year).

3. You’ll need to check whether the bonus is pensionable by default and whether your pension arrangements are based on qualifying earnings or not. Ultimately if you can easily salary sacrifice through your workplace this shouldn’t be an issue.

silvercar

3 is the most important question as it effects the childcare for the year, not just the month. Check whether a pension contribution will be made from the bonus or not. If you can’t be sure I would consider lumping a lot more into the pension to ensure you stay under the threshold.

FennecFox2

@silvercar and @steves_uk I am so sorry if this is a stupid question: Are you saying that my calculation on point three may be incorrect as my bonus may already be deducted by 5% for my pension and therefore I need to contribute less than calculated? I would rather be safe than sorry and put more in to cover me if I need to. I am incredibly worried I wont put enough in. 

silvercar

FennecFox2 said:

@silvercar and @steves_uk I am so sorry if this is a stupid question: Are you saying that my calculation on point three may be incorrect as my bonus may already be deducted by 5% for my pension and therefore I need to contribute less than calculated? I would rather be safe than sorry and put more in to cover me if I need to. I am incredibly worried I wont put enough in. 

If your bonus isn’t pensionable then you will be looking at 95,772 plus the bonus = over 104, so you may need to put over 4k into your pension to keep yourself under 100k. Exactly as you calculated, but personally I would go just under to be safe. You don’t want rounding errors to kick you over the threshold. I’d put £5k in, presumably it’s an unexpected bonus, so you weren’t relying on the money.

FennecFox2

silvercar said:

FennecFox2 said:

@silvercar and @steves_uk I am so sorry if this is a stupid question: Are you saying that my calculation on point three may be incorrect as my bonus may already be deducted by 5% for my pension and therefore I need to contribute less than calculated? I would rather be safe than sorry and put more in to cover me if I need to. I am incredibly worried I wont put enough in. 

If your bonus isn’t pensionable then you will be looking at 95,772 plus the bonus = over 104, so you may need to put over 4k into your pension to keep yourself under 100k. Exactly as you calculated, but personally I would go just under to be safe. You don’t want rounding errors to kick you over the threshold. I’d put £5k in, presumably it’s an unexpected bonus, so you weren’t relying on the money.

Thank you, no I wasn't expecting it and I wasn't relying on the money so I am happy to go over and put into pension and charity. I assume charity is exactly the same as pension? so if I reduce my bonus by 5 k i'll be sorted whether it's charity or pension?

silvercar

FennecFox2 said:

silvercar said:

FennecFox2 said:

@silvercar and @steves_uk I am so sorry if this is a stupid question: Are you saying that my calculation on point three may be incorrect as my bonus may already be deducted by 5% for my pension and therefore I need to contribute less than calculated? I would rather be safe than sorry and put more in to cover me if I need to. I am incredibly worried I wont put enough in. 

If your bonus isn’t pensionable then you will be looking at 95,772 plus the bonus = over 104, so you may need to put over 4k into your pension to keep yourself under 100k. Exactly as you calculated, but personally I would go just under to be safe. You don’t want rounding errors to kick you over the threshold. I’d put £5k in, presumably it’s an unexpected bonus, so you weren’t relying on the money.

Thank you, no I wasn't expecting it and I wasn't relying on the money so I am happy to go over and put into pension and charity. I assume charity is exactly the same as pension? so if I reduce my bonus by 5 k i'll be sorted whether it's charity or pension?

That’s my understanding