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?

No offence OP but that's not especially high. Could your boss structure the bonus as deferred share options instead?

This is nasty.

I don't earn anywhere near as much as the OP and can understand where she is coming from. It's an unexpected bonus which will mean she is negatively affected!

OP I would decline the bonus or ask for extra days holiday if possible.

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.

"Quite tight" - Oh please. Have some awareness of the world around you.

My heart bleeds for you, OP.

As PPs said, a lot of companies will put your bonus straight into your pension, mine did so I would see about that

Thanks for the charity idea. This might work!

Pension would be the best option but there isn’t much flexibility on the employer pension scheme. I can only change regular contribution in April and I don’t think they allow us to exchange bonus as a one off…I will double check though.

Open a SIPP.

Ask to defer the bonus to April payroll

I have done that in the past with a March payment and I was capped out for the year.

Bit honestly you can just debs a direct payment into the pension from net pay and complete a tax return, it's no big hassle

So many jealous and bitter people here.

We also had super strict times we could change monthly pension contribution but bonus was always an option.

Jeez you don’t get the money for free y’know, OP has earned it fairly and shouldn’t be worse off for getting a bonus.

Sorry OP, I’ll be of no help to you but YANBU.

To add to above the calculation is based on net adjusted income so you can pay extra into a SIPP and reduce the net adjusted income that way. You then need to write to them to provide evidence you've done it. Check the gov website for how it's calculated.

Agreed!

I know.

we take home approx £7k between us. Over half is nursery fees, and £2k is mortgage and council tax (inside m25 but not an amazing area). That leaves £1500 for all utilities, bills, food, commuting, clothes, for a family of 4…..is that really not ‘quite tight’. I didn’t say ‘very tight’ but it’s not like we have loads of spare cash to go on holiday etc.

Some unpaid parental leave?

This. Then you can pay in lump sum straight away.

Yeah, I was with you until this comment.

If things are quite tight on your salary, you need to have a look at your finances.

Stick some in a pension a a ms read the room ffs.

So yourself and @ProvisionsOnTheDock would accept an extra income that would mean you ending up worse off ?
if you’ve nothing nice to say then maybe don’t write it

Assuming your employer isn't a monster (as they're giving an unexpected bonus this would suggest they are not monsters at all) I'm sure you can salary sacrifice or defer the bonus. Or worse case scenario take some unpaid leave to match £2k of it.

I agree a salary like that doesn't make you rich especially when you are paying for childcare and paying off debts. For all those making scathing comments this is a classic case of divide and conquer in action. The people earning around 100k when you earn 25k or 30k are not your enemies. They are not the super rich exacerbating the huge disparity of wealth in society. Most people in that position would probably be trying to figure out how to best manage the bonus too. It also seems very unfair that as soon as one parent earns over 100k you loose your full hours whereas 2 parents earning 99k can still get them. Just like child benefit it's the system that is the issue.

It literally says in the comment you quoted that childcare alone is £3,800 every month. That's a massive cost! It's not as though OP has given the impression that she's a single person with no children who just spends her money on dinners out and clothes every week and then wonders where the money's gone.

Also, sounds like you're paying more in childcare than your husband earns?

That's something you could look at, to make the squeeze easier.

🎻