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?

Appreciate this comment. Thanks.

Do you not get it? This is a prime example of a tax system which the chancellor has been told reduces tax take. Why would you take a pay rise to be worse off? It all goes in a pension. The shortsightedness of people in this country is mind boggling. Why would anyone pay a marginal tax rate of over 100%.

OP pays about £25k income tax, and gets £11k back, so around £14k net. About 14% income tax.

OP, as a working parent, well done for earning a decent salary, working probably long hours and being a good role model to you 2 small children. It's no easy thing.

And if all the so-called 'rich' decided to use, for example, offshore tax havens, then who covers the tax? The rich can only provide so much before they resort to other measures. Instead, why not have an across-the-board policy where everyone earns the same amount, regardless of the role?

I think we probably agree in a round about way - the tax system is a joke and we’re constantly told that “the nasty Tories” give tax breaks to their rich mates via loopholes - this is exactly one of those loopholes but is also an anomaly in the sharpness of the rise. We need to simplify the system; rating bands which lift low earners out of tax, and tax progressively. Not sure any of the alternative government administrations would give as much to high earners, tbh.

Ha ha sucks to be you

Give as much? These are the people funding 54.2% of the population to take. They don’t have a personal allowance, they pay 40-45% headline tax rates and marginals of over 100%. These people aren’t the rich. They are mugged at every turn. They are funding everyone else and it’s never enough. Hated just for doing well. The actual rich with millions in assets are not paying much tax.

Seems quite a few people would be more knowledgeable if they studied factors like this.

People saying “read the room” when the room literally has a “high earner query” sign on the door 😂

You obviously weren’t willing or able to answer the query so why wander in and upset yourself with your jealousy and give successful well earning women a kicking? Smh

The rest of us, remember… You can’t argue with stupid. They will only drag you down to their level and then beat you with experience.

the nil band withdrawl at £100k just isn't generally well known and catches people out at my work often when they get with a demand for an extra £2k when they said BUT i pay via PAYE.

I used to always send a reminder each tax year to all staff (small co) about tax returns and who should do one (per HMRC guidance which includes anyone over £100k). and a reminder about pension payments to reduce salary and save
NI. But its not usual for companies to advise on staff tax arrangements and people only chatted to me about it as i was payroll person and knew what they earned.

this sort of conversation just doesn't happen in real life unless you KNOW everyone there is earning over £100k or around that.

Wrong.

You’ve forgotten National Insurance payments (tax by another name) and student loan repayments which are a graduate tax.

I didn’t make up the £40k I quoted

Very true - did my SA this morning. I have very simple tax affairs and am paid via PAYE but I owe the tax man another £4k which annoyingly can’t be dealt with via PAYE over the next year as it’s over the £3k threshold.

I guess it sucks to be you as well with that attitude

LOL! I can't tell if you are being serious or not. But the fact that you even thought of this makes people like Putin proud. smdh

Yeah, people would be lining up to be doctors, nurses and other stressful roles if they were going to get paid as much as the person who only has to say, "Do you want fries like that?"

Sometimes, TOO often anymore, it's just mind-boggling to read the posts on these threads. I truly despair for the human race.

I bow to your great way with words!

Oh yippee skippy! Now the reproduction police have shown up to impart their "wisdom". It's about as useful as six toes on one foot and about as wanted, but, here we are.

It doesn't, but it helps feed @Blanc4 's false sense of self-righteous indignation and pretend superiority.

Of course, whether anyone believes that prattle is a topic for another day. 😉

Someone on £100k pays around £35k in tax and national insurance.

And go over 100k nd the government suddenly removes any childcare help which can cost tens of thousands. That’s the whole point of this post

Yes, I know that. I was just pointing out to the previous poster that they were £10k out on their tax calculations!

@NameChangeBonus Whatever you feel about the responses, well done for starting the thread - it has certainly stirred up emotions.
Contentious though threads like this one are, they should be the basis for Mumsnetters telling the major parties what their priorities are - particularly as the GE is not far away.
Personally, I think that no part of one's wages/salary should give the earner less than 50p in any pound earned, others would like to see a return to the Beatle tax (95%, or 'one for you, nineteen for me' to quote George).
If the personal tax allowance had kept pace with the purchase price of my house (decades ago) it would now be equal to the Minimum Living Wage - should it be?
Flat rates of tax, where everyone pays a fixed rate of maybe 30% of all their income over the personal allowance would make it worth earning an extra hours wages and boost productivity - a sensible idea or a nightmare?
Those coming up to a delayed state pension were told they would not pay National Insurance past pension age, is that fair because they've been told that, or do we think the WASPI women got their just deserts for not training as pensions experts?
A record number of businesses appear to be failing, is it fair that newly formed Limited Companies get over a year to file their first accounts and many are dissolved owing taxpayers money? Should start-ups and loss-making/low margin businesses instead pay 1% or 2% of each sale as tax (as they do with VAT) to reflect the risk borne by the taxpayer? It would be one way to get money from Facebook and Amazon, but is it fair on Jane the painter and decorator?
Like the supermarkets that continually tell us that they are just responding to customer demands when they discontinue lines, eliminate staffed checkouts and so on, if we can articulate our thoughts, perhaps we should be telling those organisations which have a major bearing on our health, wealth and happiness what our priorities are.

I agree @sherloc I think the same problem exists for people on in work benefits at other earnings levels and I think it's a problem there too.

If you're going to lose 2p or 3p for every 1p you earn it feels awful, and incentivises you to earn less to try to avoid crossing that barrier. The people who lose out from a simpler tax system are tax accountants.

@burnoutbabe

that’s my point.

The bonus would be accrued in the accounts but might not be finalised until the financial year end - eg there might be an agreement of x% of profits so you’d accrue a certain amount, say £10k for the YE 31/3 accounts, but the actual amount when finalised might be £8.5k owing to various adjustments.

So it’s EARNED in the (say) 23/24 tax year but not paid until 24/25 tax year.

But according to DWhat that could be considered fraudulent which is what I was querying.

I was making a point for the posters who seem exasperated about the OP earning the amount they do and asking for advice. I needed to add more, but I was essentially offering an alternative to higher earners. Everyone would be on a basic rate of income, regardless of the role. Although as a societal experiment, it would be intriguing for those who think the OP should not earn as much as they do to try everyone on the same level wage, regardless of their role. This could help them reassess their views on the matter.