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?

@User123456713 people don't quite get why an Oncology nurse for example, working long hours, mega stressed, saving/improving lives, earns so little compared to say a senior manager in the city.

The two largest elements to this difference are:

1. When any trade/profession has more women than men in it, the perception (or maybe reality) of women happy to accept 40% pay for 60% hours to accommodate childcare drives down wages in that trade/profession. Expected to apply to an increasing number of roles for doctors as there are no more female trainees than male.
2. The vocational penalty, whereby junior workers in voluntary and public sector jobs are motivated by altruism and therefore need not be paid their true worth. Nobody thinks a middle-manager in a bank finds motivation from the goodness of their heart. Interestingly, the senior management in the voluntary and public sector are rewarded as though they are as avaricious as their private sector counterparts.

YANBU
Refuse the bonus.
Your employer will totally understand.

Are you still permitted to have some gold bars tax free. Def used to be able to.

A couple of things may not helping your case on this thread:

I think you're giving childcare figures without deducting the contributions from the govt.

I'm so skint I've got a £2000 mortgage. Yes and a mortgage on a house inside the M25 that you have the capacity to pay off

Similar attitude from someone else who said not well off we have four children in private school. Yes. You are well off. You have four children in private school.

It's like having a fridge full of champagne and saying omg I'm skint and living pay cheque to pay cheque. Yes because you have a fridge full of champagne 🤣

Not sure, but I believe one of the London football clubs blew this one.
Paid the players in bags of one pound coins, in the next room, a bullion dealer would convert the gold sovereigns into paper money.
Unsurprisingly, the Inland Revenue noticed that the club was collecting far less employee tax than its peers. Slowed them down for a bit, but other tax scams have been tried since. They get caught, but sadly, nobody seems terribly bothered.

Golly #LeanIn I hope you get sorted, honestly people come on here for genuine advice and they scorned for being a successful woman.

Those who mocked her, you all need to grow up.

Jobs in eg In the city, finance and senior management often demand specialized skills, education, and experience that may be relatively scarce, fostering a competitive environment that drives higher salaries. In contrast, certain healthcare professions, although critical and demanding, may contend with a broader pool of qualified individuals, potentially affecting wage levels. The market value of a job may not necessarily align with its social or societal value. Healthcare professionals, exemplified by oncology nurses, make immense contributions to society by saving and improving lives. However, the compensation for such roles is often influenced by budget constraints within the healthcare system.

It's quite clear the OP has taken salary sacrifice to make their salary 96k to allow for a 3ish k bonus and not go over the 100k threshold.

So, they've played the system and got found out.

The answer easily is to ask for 1k of the latest bonus to go to the pension pot, or just forgo it and explain to the finance people why.

But the fact they've already gamed the system and lost, and decided to tell everyone, is a bit silly

Are you feeling ok? Or is that jealousy blinding you. If it’s the first time op has come across this - then she will need to ask. She is allowed to. Of course people will try and stay below 100k if they will be thousands of pounds worse off. It’s a marginal rate of over 100 percent. This kind of issue makes up an accountant’s work. The government knows it’s harming tax receipts. The government also knows it was causing issues with experienced consultants working less - so as not to break the threshold. Actually paying to work is mad. That’s why they changed the pension allowance. It’s no big secret here. The government know full well they take less tax, the country is less productive and it’s actively harming public services like the NHS.

Frankly, here is a grip for you to get. They have done absolutely nothing wrong.

Jobs in eg In the city, finance and senior management often demand specialized skills, education, and experience that may be relatively scarce, fostering a competitive environment that drives higher salaries. In contrast, certain healthcare professions, although critical and demanding, may contend with a broader pool of qualified individuals, potentially affecting wage levels.

Which is essentially supply and demand.

I have a colleague from my investment banking days who earned seven and eight figure bonuses. It was based on a percentage of fees earned (for advisory services not lending before it starts another GFC debate). He saw a new business area, was brilliant at pitching and had the financial expertise to deliver what clients wanted.

Working in investment banking was an eye-opener because, as interesting as it is, the silly hours mean that people do it for the money and there's no pretence otherwise. If you don't get rewarded appropriately, you join a competitor and, if you're senior enough and play the non-competes carefully, you take your clients with you.

99% of fee earners were male and the first thing they told me was never say thank you for your bonuses as it make you look weak. In many way an unforgiving place to work but you realise that men are far less embarrassed about demanding higher salaries than we tend to be.

What a ridiculous take on matters. By the same token you could argue that anyone one on minimum wage has gamed the system because they’ve avoided earning over 100k and thereby avoided 60%+ marginal tax rates.

Only people earning over 70k pay more in tax the the cost of the services they use. The last thing anyone earning above that figure is doing is gaming the system. They are in tax subsiding everyone who earns below 70k.

Fighting ridiculous responses with ridiculous responses.

God knows where you have this 70k figure from, it’s surely highly dependent on use of services, how much petrol you buy, if you cop for capital gains tax, inheritance tax, how many years you earn a good salary for etc etc. Most importantly how ‘individual use’ is calculated.

The 70k figure comes from the Office of National Statistics.

They calculated average cost of providing all services including NHS, schools, roads, social care, etc and averaged it out per person. The break even figure equates to the amount of income tax paid by someone on 70k. For a couple this needs to be doubled.

Of course these are just averages as everyone’s circumstances are different and needs change over time but it gives a good indication of how the country is funded.

A relatively small number of people are bankrolling everyone else. The top 1% pay over 30% of all income tax.

Actually the most important factor in being a net contributor is probably dying at 65.

So go on link it so we can read what it actually says.

The most important factor would be never getting seriously ill.

The charitable donation is not a good idea as it is not true. It is the charity that benefits from the tax credit not the individual making the donation.

Yep that’s right. Dying suddenly at 65 from a heart attack caused by smoking 40 a day having shown no previous ill health. Thats the way to contribute the most.

Also the top 1% get around income tax.

That’s incorrect. BOTH parties benefit.

Many of the top 1% earners are PAYE and therefore no way to avoid a penny of tax.

Regardless of that I don’t think they should shoulder a burden that is any more than 30 times higher than what the average person pays.

I love how the attitude in the UK is always of a race to the bottom. Average and median salaries in the UK are insanely fucking low compared to many other countries in the West and there’s barely been any wage growth in decades. Yet instead of being angry at this, we all pile on someone who earns ‘well’ - when 100k honestly isn’t the amazing salary it was twenty, thirty years ago.

Have you got this ons link? I’m a nerdy economist so am generally interested to see what that stat actually is.

And yes many of the top ‘1%’ will be paye if you believe that’s truly the top 1% 🤣. And they’ll avoid tax in other ways believe me.

Of course earners over £120k are still affected by the 60% tax rate.....their income between 100-120 is still at that rate....anything beyond 120 then goes back to normal tax rates!

My god people are jealous on here today!! Where I live 100K would not be classed as high, in fact most people I know earn that either on their own or household. OP has clearly worked hard for that salary, it’s absolutely disgusting the attitude towards higher earners on mumsnet.