Decrease in personal allowance on bonus payment

mortgageadviceda

I’m hoping someone can advise please. My salary is just under £100K. I’ve found out that my company may be paying two bonuses this year. One in July and one in August.  If paid this could be up to £35k. It could also be much less.

At the moment my tax code allows me to receive my full personal allowance tax free but if I receive the bonuses this will take me over the threshold and I will lose some / all of my personal allowance and owe tax on this.

Ideally I want to stay on my normal tax code with my full personal allowance and if the bonuses are paid, keep back the additional tax I will owe and pay it one sum at the end of the tax year. I would rather do it this way way than HMRC change my tax code to recover this tax and then each month, when I get my normal wage, pay higher tax as my normal monthly pay will decrease as I need my normal salary to cover all my outgoings (mortgage, childcare etc). 

The question I have is is this possible and if so how do I make this happen and stop HMRC changing my code when the bonuses are paid?

 Do I need to complete a self assessment tax return at the end of the year to cover the  tax owed?

Ps I am already maxing what I can put in my pension etc. not looking to avoid the 60% tax trap. Just want to know how I keep my full personal allowance code and pay the additional tax bill separately. Thank you 

Dazed_and_C0nfused

mortgageadviceda said:

I’m hoping someone can advise please. My salary is just under £100K. I’ve found out that my company may be paying two bonuses this year. One in July and one in August.  If paid this could be up to £35k. It could also be much less.

At the moment my tax code allows me to receive my full personal allowance tax free but if I receive the bonuses this will take me over the threshold and I will lose some / all of my personal allowance and owe tax on this.

Ideally I want to stay on my normal tax code with my full personal allowance and if the bonuses are paid, keep back the additional tax I will owe and pay it one sum at the end of the tax year. I would rather do it this way way than HMRC change my tax code to recover this tax and then each month, when I get my normal wage, pay higher tax as my normal monthly pay will decrease as I need my normal salary to cover all my outgoings (mortgage, childcare etc). 

The question I have is is this possible and if so how do I make this happen and stop HMRC changing my code when the bonuses are paid?

 Do I need to complete a self assessment tax return at the end of the year to cover the  tax owed?

Ps I am already maxing what I can put in my pension etc. not looking to avoid the 60% tax trap. Just want to know how I keep my full personal allowance code and pay the additional tax bill separately. Thank you 

There isn't much you can do if HMRC want to update your tax code with the latest information available.

But I haven't seen anything in their PAYE manual to suggest receiving a bonus in itself is going to prompt a new tax code. 

There is nowhere separate to report a bonus on the Real Time Information submission your employer will have to submit to HMRC, it's just part of your monthly earnings (in July and August).

Self Assessment is no longer required for PAYE high earners with no other reason to file a return.  HMRC will send you a calculation detailing any tax due (if there is tax owed).  If it is £3,000 or more though you are likely to have to pay it direct to HMRC, usually by 31 January after the end of the tax year (if they send the calculation, a Simple Assessment letter, at least 3 months before then).

https://www.gov.uk/tax-overpayments-and-underpayments

mortgageadviceda

Thank you for your really quick reply.

When you say we can’t influence if HMRC adjust tax codes, I do need to ensure this doesn’t happen. If the bonus means I lose my personal allowance, I can’t allow them to adjust my tax code for the remaining 10 or 11 months when I get normal pay as my take home each month will then be significantly reduced and I won’t be able to cover my bills! I need to pay the additional tax I owe from the bonus through a one time payment. I appreciate that means my bonus is significantly reduced but I’d rather this than lose out on my normal monthly wage.

I assume payment owed will be about £5K if I lose all my personal allowance. 

can I not set my own tax code through the app? I do see that you can enter expected salary and I assume this then calculates your code? 

400ixl

I just update my likely income on the government gateway app which then adjusts my tax code for the year.

Usually calculate Salary minus salary sacrifice pension + estimated bonus + other revenue such as savings interest.

Can't be 100% accurate so then do the final tally up as part of self assessment.

Nomunnofun1

mortgageadviceda said:

Thank you for your really quick reply.

When you say we can’t influence if HMRC adjust tax codes, I do need to ensure this doesn’t happen. If the bonus means I lose my personal allowance, I can’t allow them to adjust my tax code for the remaining 10 or 11 months when I get normal pay as my take home each month will then be significantly reduced and I won’t be able to cover my bills! I need to pay the additional tax I owe from the bonus through a one time payment. I appreciate that means my bonus is significantly reduced but I’d rather this than lose out on my normal monthly wage.

I assume payment owed will be about £5K if I lose all my personal allowance. 

can I not set my own tax code through the app? I do see that you can enter expected salary and I assume this then calculates your code? 

You can adjust your estimated income on your personal tax account through the tax year.

TheSpectator

Nomunnofun1 said:

mortgageadviceda said:

Thank you for your really quick reply.

When you say we can’t influence if HMRC adjust tax codes, I do need to ensure this doesn’t happen. If the bonus means I lose my personal allowance, I can’t allow them to adjust my tax code for the remaining 10 or 11 months when I get normal pay as my take home each month will then be significantly reduced and I won’t be able to cover my bills! I need to pay the additional tax I owe from the bonus through a one time payment. I appreciate that means my bonus is significantly reduced but I’d rather this than lose out on my normal monthly wage.

I assume payment owed will be about £5K if I lose all my personal allowance. 

can I not set my own tax code through the app? I do see that you can enter expected salary and I assume this then calculates your code? 

You can adjust your estimated income on your personal tax account through the tax year.

But if OP's income is on course to exceed 100k then putting in a figure of less than 100k would be lying.

It's not a case of what OP wants, PAYE is supposed to collect the correct tax (as far as possible) from PAYE income (you can opt to have non-PAYE income coded excluded) but manipulating the system shouldn't be advised.

saajan_12

mortgageadviceda said:

Thank you for your really quick reply.

When you say we can’t influence if HMRC adjust tax codes, I do need to ensure this doesn’t happen. If the bonus means I lose my personal allowance, I can’t allow them to adjust my tax code for the remaining 10 or 11 months when I get normal pay as my take home each month will then be significantly reduced and I won’t be able to cover my bills! I need to pay the additional tax I owe from the bonus through a one time payment. I appreciate that means my bonus is significantly reduced but I’d rather this than lose out on my normal monthly wage.

I assume payment owed will be about £5K if I lose all my personal allowance. 

can I not set my own tax code through the app? I do see that you can enter expected salary and I assume this then calculates your code? 

You can't entirely refuse to pay the tax on the bonus on when due through PAYE and effectively demand an interest free loan if you're expecting to pay the bonus at the end of the tax year. 

What you can do is tell HMRC your expected income, ie that the 35k isn't your new average salary. 

Re your monthly expenses, there's no change for Apr-June. For the months after the bonus, just keep 5-6k aside from the bonus and transfer a portion from a savings account into your current account each month to top up your salary back to where it was before. Whats the issue? 

mortgageadviceda

I understand what people are saying, but I want to be clear that I wouldn't be lying.

My usual salary is just under £100K. A bonus can't be guaranteed, and therefore I want to keep the tax on this separate and pay it separately. I don't want this to impact my usual take-home pay, as it will leave me with significantly less each month.

Yes, I could put away the additional tax and top up my wage each month if needed, but I would rather simplify this and pay the tax from the loss of my personal allowance in one hit.

Anyway, how is HMRC likely to deal with this? If I keep my salary in the app as the usual ~£100K, will they readjust the tax code after the bonus, or will they keep it as it was and issue a tax bill at the end of the year to cover the additional tax required through the loss of the personal allowance?

EnPointe

mortgageadviceda said:

I’m hoping someone can advise please. My salary is just under £100K. I’ve found out that my company may be paying two bonuses this year. One in July and one in August.  If paid this could be up to £35k. It could also be much less.

At the moment my tax code allows me to receive my full personal allowance tax free but if I receive the bonuses this will take me over the threshold and I will lose some / all of my personal allowance and owe tax on this.

Ideally I want to stay on my normal tax code with my full personal allowance and if the bonuses are paid, keep back the additional tax I will owe and pay it one sum at the end of the tax year. I would rather do it this way way than HMRC change my tax code to recover this tax and then each month, when I get my normal wage, pay higher tax as my normal monthly pay will decrease as I need my normal salary to cover all my outgoings (mortgage, childcare etc). 

The question I have is is this possible and if so how do I make this happen and stop HMRC changing my code when the bonuses are paid?

 Do I need to complete a self assessment tax return at the end of the year to cover the  tax owed?

Ps I am already maxing what I can put in my pension etc. not looking to avoid the 60% tax trap. Just want to know how I keep my full personal allowance code and pay the additional tax bill separately. Thank you 

you do realise  how tax codes work don't you ? 

you  do realise  how it  sounds for somone in the top 2 % of incomes to be actively seeking to evade paying tax 

eskbanker

EnPointe said:

mortgageadviceda said:

Ps I am already maxing what I can put in my pension etc. not looking to avoid the 60% tax trap. Just want to know how I keep my full personal allowance code and pay the additional tax bill separately. Thank you 

you do realise  how tax codes work don't you ? 

you  do realise  how it  sounds for somone in the top 2 % of incomes to be actively seeking to evade paying tax 

Uncalled for, OP is quite clear about being prepared to pay the required tax, but just wants to influence its timing.

TheSpectator

eskbanker said:

EnPointe said:

mortgageadviceda said:

Ps I am already maxing what I can put in my pension etc. not looking to avoid the 60% tax trap. Just want to know how I keep my full personal allowance code and pay the additional tax bill separately. Thank you 

you do realise  how tax codes work don't you ? 

you  do realise  how it  sounds for somone in the top 2 % of incomes to be actively seeking to evade paying tax 

Uncalled for, OP is quite clear about being prepared to pay the required tax, but just wants to influence its timing.

By misrepresenting the facts to prioritise other bills?