High earner query - basically over 100% tax on xmas bonus.

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My employer has decided to be very generous and give everyone £5k cash bonus this Xmas (in previous years they have given £2k). I have adjusted my salary sacrifice pension contributions so I earn approximately £96k gross. I cannot amend this until April as per my employer policy. I thought there was enough buffer for bonus and benefits.

problem is if I earn over £100k (I have 2 kids aged 1 and 3 in full time nursery)

• I will pay 60 % tax on my bonus
• i will become ineligible for tax free childcare - worth £333 per month,£4k per year
• I will become ineligible for 30 hours childcare for DD1 - worth £600 per month, £7k per year.

basically because I’m getting this bonus we’ll be much worse off financially - is there anything I can do to avoid this?

Ask to not have it?

Maybe spend it on having your diamond shoes re-sized?

Ask that yours goes to the lowest paid member of staff, for whom it will make a massive difference in their life. I'm glad high earners pay more tax, we should ensure super rich people do too.

You can refuse it? Think that is pretty much all you can do unfortunately

Ask for 3k and an extra few days holiday next year instead.

Ask for £3k so you don't go over

Have you reached the 60k threshold if not pay some into a personal pension and fill in a tax return to show you are under the 100k threshold. Not 100% sure if this allowed though check with an accountant.

Additional pension contributions (from your net salary). I think (please do check) you can take these off before you get to the £100k for childcare purposes - look at what adjusted net income means on the gov.uk site

🫣

Ask for a lower amount. I'm sure your HR department will understand te implications of going over £100k.

Pay for an accountant to give you advice.

Just refuse it. You don’t have to accept a bonus.

Just speak to your employer and ask not to have it. I’m sure earning near 100k a year you could have worked that out yourself though!

someone who earns £120k pays 60% on their top 20k….and I’m actually have less money by being given a bonus….surely that doesn’t make sense.!

someone who earns £150k only pays £45%….how is that higher earners paying more tax….

Why such a nasty comment? Being a high earner is got its benefits but when you just go over one threshold it’s got tax implications and sometimes it doesn’t make sense going over it
if you’ve nothing better to say then keep your jelousy to yourself

We used to be allowed to opt to have our bonus put straight into pension. Ask if this is an option.

I think I will try to ask this

I believe charitable giving can also reduce your adjusted net income so that might be an option. If your employer has a payroll giving scheme that would make it really easy as well.

Yes I'd do a year end xtra pension payment direct to reduce again.
You just don't save ni at 2%
Weird your employer doesn't offer any option to do bonus into pension -saves them 13.8% too!

I think you can donate to charity to keep your adjusted net income below £100k which would make the world a better place and allow you to continue to get your childcare.

You just need to accept that your actual bonus is taxed because that’s how the world works.

Definitely worth checking if they can do this - my work always did as well.

1. Ask to put it straight into pension
2. contribute to a personal pension and do a tax return
3. Ramp up your monthly pension contributions for the rest of the tax year to bring you in under £100k
4. Donate to charity and do a tax return to get the tax relief
5. Invest in EIS private equity and do a tax return to get the relief

I don't earn as much as you but I get my bonus paid into my pension mainly because I'd rather have the full amount in my pension than 60% of it in cash after I've paid tax. Luckily I don't count on it for anything so out of sight out of mind.

You used to be able to donate to charity, check if this is still an option. Alternatively pay extra into your workplace pension

No need. Not super rich, have no savings, a huge amount of student debt, big mortgage and 2 kids in full time nursery costing £3800 per month for childcare alone. DH is in an industry where salaries are much lower. so things are actually quite tight.