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?

Do you understand the OP’s issue? As it appears you don’t.

OP, speak to payroll sooner rather than later as it's normally all finalised two weeks before it's due to be paid out. It might differ for the Christmas payroll.

Oh my goodness, I'm so depressed by some of the replies here. Can't we aim for, want and celebrate the idea of people not just getting by and being grateful for it, but rather, living with abundance and wealth?

The UK is a very low-wage economy compared to our peer nations and that is a really bad thing.

The place to direct our energy towards is wanting more people to earn well, not being critical of people who earn well and want to feel the benefits of that success. A rising tide, not a cutting down to size, would be best for everyone! Higher wages and more productivity means more money for the services that benefit everyone.

And pretty much everyone who analyses our tax and benefits situation says that the sort of thing the OP is facing shows the system is screwed. No system should have such huge marginal tax rates. It's been tinkered with and patched to the point of incoherence and unfairness, and it's in desperate need of reform: that's widely recognised.

What company information services?

It's not a standard thing and the withdrawal of the personal allowance at £100k, generally meaning paye have to find extra at year end when they do a tax return, is often a surprise to most who reach that level. Paye can't cope with it so it's ab extra charge for lots of people.

If there are posters who feel upset or triggered reading posts by high earners then the answer is to not click on a thread that is clearly about someone on a high income.

Yes, it's not like OP didn't spell it out quite clearly in her title! People do need to take responsibility for not opening threads they know full well are going to upset them.

You should be able to either

• make a direct payment to your workplace pension (not through payroll)
• make a direct payment to a personal pension
• make a donation to charity

You will need to fill in tax return or otherwise let HMRC know via your online account if you don't usually submit one.

Apart from I’m not sure about op but my company and previous ones really are against giving you financial advice and any tax questions have to be done to experts and not them

Ask them to donate it to a charity instead.

Yeah that's tax evasion lol

As is asking them to pay her husband (wtf!) who doesn't work for them or giving her cash in hand!

You are not a low earner. Someone earning £22k pa or less is a low earner. I can guarantee that there will be people in your company or providing direct services to your company who are actual low earners.

Ask for £3000 to be given to you as a bonus instead and that £2000 be donated to a charitable cause of your choice. Food banks are struggling right now, homeless charities, women's charities that help women fleeing from domestic violence, etc.

Completely agree.

No one has said the OP is a lower earner. She hasn’t said this herself. 🤷‍♀️

You should have posted this in Money Matters not AIBU, people here are very bitter towards anyone doing well.

I don't live in the UK so I don't have any advice regarding tax but I think it's rediculous that you can be worse off over a 5k bonus.

@burnoutbabe my employer doesn’t offer the option to take a bonus as pension contributions. I wish they did - it regularly (like every flipping year) messes up my tax calculations.

The £100k tax cliff is a right pain - the marginal tax rates are astronomical which is the sign of a poorly calibrated tax system.

Are you in the wrong thread? The post you're responding to isn't about being a low earner.

Agree with this. Mumsnet really need to have a look at themselves if this is allowed.
I reported that username as soon as I saw it.
How awful would it be for someone to come on for support surrounding sexual assault and see that.

If you refuse it, you need to watch that HMRC don't consider that you havent already "earned" it for tax purposes. Waiving a bonus should be done before you've "received" it per tax rules or it'll be included in taxable income regardless. Normally if you do this (in writing) before you're paid it or you're entitled to be paid it, should be ok but get advice from HR/payroll.

@usernamealreadytaken she’s paying 60% tax. How much more would you like her to pay? Enough for her to think sod it id be better off getting a low paid job, paying less tax and have less stress. If you think making the top earners, who pay most of the income tax in the country, feel they have no stake in the social contract is a good thing, then 70/80% tax rates will do that.

What’s the point in getting in to debt studying, dedicating yourself to a profession and working hard if you don’t see a financial benefit from that. Or are all the lower paid people angels who would be happy to work for free once their living costs were covered if they found themselves in a better financial position.

We were recently in a similar situation and I rang and spoke to the HMRC tax free childcare people. They are really helpful and understanding and happy to talk you through your options. They told me we could add more to existing pension (not an option due to employer), take out a private pension, or donate to charity. So there are definitely options and you won't have to lose your entitlement.

You should be able to make your own contributions directly to your pension provider to achieve the same end. Then you just need to do a tax return.

The question is why are posters so triggered. I’m technically a low earner due to AI illness so I can’t work FT. Yet I have no issue with people earning more money. I can only infer that too many MNers are materialistic, jealous and bitter people.

You should put this bitter energy towards getting a higher paying job yourself.

Need to work on your social skills first.

There's no need to be nasty. It's not the OPs fault that some people have to survive on SSP. She has every right to ask the question she did.
Your comment about having children to stick them in childcare is just ridiculous.

I think as you're so close to the threshold I'd say you need to plan generally for losing all those benefits within the next year or so as surely any pay rise is going to tip you over.