Decrease in personal allowance on bonus payment

mortgageadviceda

TheSpectator said:

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?

wow you have no idea of my circumstances. how dare you. I will pay every bit of tax that I have to pay. It's simply about HOW i pay it.

eskbanker

TheSpectator said:

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?

I'm not defending any attempt to misrepresent, but was simply correcting the assertion that they're trying to evade tax.

mybestattempt

mortgageadviceda said:

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?

My understanding, from the HMRC guidance in the link below, is that an employee's estimated income for coding purposes is updated every time the employer submits a monthly return (FPS) to the RTI system:

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye13090

If I'm correct then HMRC will review the estimated income for 2025/26 after the bonus payments are made and adjust the code appropriately.

You can appeal a tax code but it's unlikely to succeed if your grounds for appeal are that it is your personal preference to delay paying tax. 

Unfortunately, PAYE means Pay As You Earn not pay when you want to.

400ixl

It would depend on which month the bonus is paid. If it is in the last month it would work, otherwise it probably won't.

eskbanker

400ixl said:

It would depend on which month the bonus is paid. If it is in the last month it would work, otherwise it probably won't.

From OP:  

mortgageadviceda said:

I’ve found out that my company may be paying two bonuses this year. One in July and one in August.

mybestattempt

400ixl said:

It would depend on which month the bonus is paid. If it is in the last month it would work, otherwise it probably won't.

The OP has said any bonuses will be paid in July and August.

Nomunnofun1

Going back to the original post I don’t think that the the outcome being sought is possible. 

Personally, I would rather the PAYE system was able to collect the correct amount of tax due within the tax year than wait for it to be rectified sometime afterwards - with potential further adjustments in the following tax year. 

Each to their own!

mortgageadviceda

saajan_12 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'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? 

Thanks for everyone’s comments. I think saajan is right. I will need to save what I believe the additional tax will be for losing my personal allowance on payment of the bonus and then use this every month to top my monthly wage back up from the hit it will get from the adjusted tax code going forward. I’d rather deal with it in one tax sum but apparently that won’t be possible! 

Dazed_and_C0nfused

mortgageadviceda said:

saajan_12 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'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? 

Thanks for everyone’s comments. I think saajan is right. I will need to save what I believe the additional tax will be for losing my personal allowance on payment of the bonus and then use this every month to top my monthly wage back up from the hit it will get from the adjusted tax code going forward. I’d rather deal with it in one tax sum but apparently that won’t be possible! 

It will all depend on whether HMRC have any reason to review your tax code after one of the bonuses has been paid.

If that doesn't happen it might work out how you would prefer.  Just because a bonus is included in your taxable pay doesn't guarantee a new tax code will be calculated.

But there may be other updates, for example new untaxed interest details (the actual info for 2024-25) or P11D benefits (new estimate for 2025-26 after receipt of a 2024-25 P11D) which might prompt a tax code update.