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

[NameChangeBonus]

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?

Imagine coming on to a thread literally titled "high earner query" to play whataboutisms and pity me's, about surviving on universal credit, food banks or on a low wage, etc. it's hilarious, people who earn more are allowed to have problems, worries, queries about their own circumstances, and they're allowed to claim whatever the fuck they're entitled to by law including funded childcare hours.

The U.K. has productivity issues and I think a lot of it stems from deep bitterness. Well done to the OP for working hard and paying a lot of tax. Imagine if everyone who was physically and mentally able had so much drive and focus. Unfortunately many people are stuck in a poor me let’s cut down the tall poppies mentality.

The OP’s £5k bonus will cost her £14,000. She is already paying £40k or so in tax and student loan payments.

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.

But yes she shouldn’t complain. She should just suck it up because you’ve decided she’s rich.

Everyone complaining about the OP's 6 figures are myopic and shallow intellect.

You're focusing on trying to punch the people within your reach instead of being smart and bringing your fight to those in government and major corporations who step on your neck everyday. THEY'RE the ones who have helped make average salaries pauper like standards of living, while THEY make MILLIONS on you, your labour, and the ridiculous fines and fees they unfairly levy.

I've made 105k living in Surrey and trust, that's NOT a lot of money! What you SHOULD be mad at is that your jobs in countries like the US and AUS make 20-30% MORE than the equivalent version here! And even in the EU they make percentages more. I'm from the US so I can say after living in the UK for over 20 yrs, the UK is like a former 80s celeb desparately trying to remain relevant. The standard of living here is fairly atrocious when you look at the companies, and opportunities that exist in the country.

Yes I love the UK people, but those in power have really got the wool pulled over your eyes. Stop fighting each other, look up and cut the marionette strings.

Surely that £1500 spare is if you didn’t get the tax free childcare and free 30 hours if you accept the bonus?

Currently you should be better off than that because you are under the 100k and you get the above?

I'm retired but used to run payroll for more than one company. I've had similar issues int he past and it is a simple matter to adjust it (not pay it to one person or pay a smaller amount.) Just speak to your employer, if they won't adjust it they are just being awkward which would seem odd for a company that is generous enough to pay a £5k bonus.

OP speak to your HR see if you can exchange some of it for holiday allowance instead or a charitable donation straight from your HR.

I'm not in the same predicament but I completely get it when a one off pushes you to then become worse off significantly over the space of a year.

I'm so sorry that you've received some nasty bitter replies on this thread OP. Perhaps Mumsnet isn't always the best platform for this type of advice.
Maybe speak to an accountant who would be best placed to recommend the most tax efficient way of managing your finances?

Or pay over 100% tax to keep you in your bitter, jealous ways.

Put the extra into a pension before the end of the tax year op and you’ll have to self assess.

I sincerely hope they wouldn't be allowed to make a cash payment.

So instead of getting a better job or taking the hit and taking your bonus, you relied on people like the OP to pay for you and your kids? Nice comment.

There are those that are paid within a PAYE scheme and generally have to pay and reclaim (other than HMRC not coping well with taxpayers with two income streams), then you have the former Prime Ministers who buy houses owned by offshore companies for cash (nice one Tony), avoid stamp duty and are able to borrow against the asset to free up ready cash - tax free and possible off-settable. After that the superwealthy can arrange for income to be generated in low- or zero-tax countries and buy portable assets there.
It's the small percentage of very high PAYE earners who pay the majority of income tax. This gives HMRC and Chancellors good column inches of 'fat cats being punished'.
Very little (if any) of the rumoured £5 million+ that Boris has made since being kicked out of office will be PAYE.

The OP’s title was crystal clear.

never mind reading the room, read the title!

Well said! 👏👏👏

Probably best not split across tax years as it would be considered tax fraud as the earnings and bonus relate to one specific tax period.

Remember folks that it was the Tories who brought in all of the things causing the OPs problems like the tapered allowance, childcare reduction, reducing the additional tax threshold, and childcare industry regulations that has caused rates to go sky high. If you think you will be poorer under Labour, I can’t possibly think how Labour could do any worse a job.

To everyone saying OP and other high earners should pay taxes are saying that because they know they can never work as hard as OP.

Tbh comments like this cause a lot of issues and resentments. Low / lower pay does not mean that someone isn't working hard, conversely someone earnings lots isn't necessarily working hard, they are perhaps just in a more lucrative industry or paid for the level of responsibility bearing down on their head.

The OP hasn't said what she does, who knows how hard she works.

And we still have the highest taxes for 70 years.

@Dwhat123

Would it? Plenty of bonuses are calculated after year/period end etc.

If a business had a financial year ended 31/3 and bonus wasn’t therefore finalised and paid until April/May that would be considered fraud as the earnings relate to the prior tax year?

Ugh yeah we had this one year when DH got a pay rise that was actually a pay cut because of what it did to tax. We were paying 60% tax for a while.

Ask the employer not to give you the bonus, I don’t know if they can sort that though.

Sorry some people on the thread have been rude. So much envy on Mumsnet. Funny how some people feel free to be spiteful to those who earn more than them but never dwell on how much more they have than eg those starving in Africa.

Keep benefits universal, keep the nil rate band for everyone. Add CGT, dividend income and NICs to the main income tax rates and increase tax rates to make up any deficit.

it’s simple, there are no massive disincentives to earning more, wealthy pensioners pay more tax, people cannot dodge tax by pretending to be contractors, PAYE is hard to avoid, it’s a win win win.

“the UK is like a former 80s celeb desparately trying to remain relevant. The standard of living here is fairly atrocious when you look at the companies, and opportunities that exist in the country.”

This is my new favourite analogy 😂👏

thats how most business's work

The bonus would be accrued in the companies books for that financial year end -(though for Corp tax it would be allowed relief when paid)

for personal tax - you are taxed when its included in your payslip - and often bonuses are entirely discretionary as to timing and amount so management can choose to pay them as they wish (or not at all). or pay them in chunks for cash flow purposes.

its possible if your contract said "You will receive a bonus of £10k on 31st march each year" that you asked to delay until April for some reason, HMRC would adjust the tax return if they were already doing an investigation but else how would HMRC know you were due a bonus and deferred it to following month- they rely on payroll reporting.

Thanks for this.

Working hard is rarely well rewarded in the UK. There is an assumption that senior management and directors need to be incentivised with additional financial rewards, whereas those at the bottom are best motivated by having things (overtime, shift allowances, sick pay) taken away.
I have lost count of the number of times that I have seen an overlooked truly exceptional, non-sales employee leaving, leading to income dropping or costs rising dramatically.
Almost everyone here will have been impacted by the cost of living crisis, but how do we think our MPs are affected? When our current Chancellor left the Foreign Office four years ago, he got £16,876 to help soften the blow and it triggered a tsunami of generous payoffs for his team.

Time and time again we’re told that public services are chronically underfunded and the rich should pay more taxes, and simultaneously that people in poverty don’t get enough benefits to live in. Then we’re told that people earning over £100k aren’t really that rich. Which rich people should pay more; what’s the magic cut off?