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?

At household level it really is normal, it’s just 2 people with good jobs.

I’m in the top 1% of earners and receive it all via PAYE. I can assure you there are no ways to avoid tax if you’re in this position.

😂😂😂👍🏻. Me too, I play upfront for Man U.

I’m still waiting for that link.

I’m in the top 1% of earners and receive it all via PAYE. I can assure you there are no ways to avoid tax if you’re in this position.

I don't know any high earners who don't pay PAYE, including on employee share plans.

There are some steps you can take to avoid inheritance and capital gains tax. Although the easiest are ISAs and SIPPs which are government-approved schemes and subject to caps.

To be fair you’re only allowed to save 20k a year into an ISA so if you were trying to avoid tax and in the top 1% of earners that wouldn’t help much.

The truly rich have fund managers, offshore bank accounts and assets, parts of their portfolios set up as companies etc etc. So they may be partly paye but they have lots of other income streams.

There is a disconnect between the truly rich and those who earn high salaries. Mumsnet struggles to understand that and instead identifies the ‘wealthy’ as anyone who has a little bit more than them.

To be in the top 1% of earners you need to be earning around 170k+. There are a lot more normal jobs that attract that kind of salary than you would imagine. You don’t need to be a PL footballer. Senior lawyer, plc Board director, senior commercial director, senior finance role etc. All will attract such salaries and will likely be PAYE.

Where I work there are around 25 people on such salaries and every single one is paid via PAYE.

As for the other info, google is your friend. You will see that over half of all households actually receive more cash benefits than they pay income tax. The 70k earnings figure relates to benefit of all services provided not just straightforward cash payments.

What i can never understand from these threads is how someone so smart to earn the amount op gets is so clueless with money.

That’s correct. I’m much closer to someone on minimum wage than I am to the super wealthy elite.

I think the easiest way to avoid inheritance tax is gift it and live another 7 years then it's tax free. If you die within the period tax is levied. Just gift it to your kids in a locked account/fund and sit around

Either pension or give part of it to charity.

That’s harsh, they’ve already done some financial planning to keep below the threshold, this was just more than they expected.

Not sure where you get your figures from, but you’re overestimating.

Someone on £100k pays £27,432.00 tax and £5,518.60 NI, or just under £33k total.

OP has already said she reduces her taxable salary to £96k via salary sacrifice, so she pays £25,832.00 tax and £5,438.60 NI. Once you deduct the equivalent value of TFC and free hours (£11k), OP pays less than £15k income tax plus NI taking her contribution to just over £20k. You seem to think she pays about 40% more…

So where’s the cut off? Do will still give those on £200k free childcare and tax breaks? Those on £500k? I thought we wanted better public services which need to be funded via tax, yet someone earning over £100k is able to pay only £20k net income taxes.

You don’t get the £11k refunded - the OP’s nursery costs are simply reduced by that amount.
You've also forgotten student loan payments which are a tax on graduates - 9% or so.

Her NI is around £5.5k, so her net income taxes are just over £20k. You’re overestimating by about 50% - you made up the £40k figure.

No, you’re the one making up numbers.

There’s no such thing as Net Income tax.

And there we have it, the politics of envy. The actual rich have assets; no matter that many of them worked for those assets, and indeed OP will also have a very valuable asset given that she’s buying a property in London. Is there a figure you have in mind for the worth of the “actual” rich? Do you just mean those with “old” money, or do you include new money, people like Jamie Oliver, the Beckhams, James Dyson? They worked and invested and reaped the benefits and are now stupidly wealthy - how much more of their money should we be able to take?

Well you were seriously underestimating in that case. I said approx £35k, you said £25k but now you’re saying it’s actually £33k. Who was closest?! Also, I never mentioned the value of tax free childcare etc. I was talking about people who earn £100k in general.

You seem to know what you're talking about. Make the podcast series! I'd definitely listen to it 😁

Like many others have said the refusal, pension, or charity seem options to consider m.

But what never seems to be acknowledged is that the OP (and anyone else on salary sacrifice) has a salary of 120k, but a ‘pretend’ salary of 98k, already allowing tax and NI savings and access to various schemes.

Salary sacrifice schemes are not compulsory nor promoted tax saving schemes (unlike ISAs before anyone says). Surely if you were to compare an employee on similar salary but the employer doesn’t have salary sacrifice, it would be clear that the OP is already saving tax and getting more out than her counterpart would be.

Happy to be corrected but having salary sacrifice already seems to be quite a benefit to some?

You mean people who minimise the tax they pay, like OP does? I guess the difference is that they probably don’t claim additional benefits on top. We don’t know how much DH earns, but even on min wage their household income is over £130k - and we’re arguing that OP is being hard done by if people on £25k aren’t contributing to her childcare costs? FGS.

Where’s the cut off then? How much should a person be able to earn and still get taxpayer funded childcare? £150k, £250k, £500k? Wherever the cutoff is, there will be a massive marginal tax jump. We’re arguing here about a household with an income of maybe over £130k, getting something funded by families who will never get close to that level of income.

Here’s an idea - go find it yourself, it’s well documented. The poster is correct. Or do you like spending your Sunday logging onto a thread you can offer no advice on - to tear down a woman who earns a hood wage out of jealousy and spite. The behaviour in here is vile.

What? Explain to me why you think a marginal rate of over 100% is acceptable or going to boost tax take. Better still, don’t click on a thread you don’t understand just to tear a woman down. It’s a very bad look.

Alternatively, there doesn't actually have to be a cutoff. As there isn't for the 15 free hours at 3. We provide any number of things to people who are entitled to them regardless of their income, and avoid the cutoff problem. Statutory maternity pay, state pensions, bus passes. Clearly it's a principle that we as a society accept. As we should, since it's a good idea to keep the highest earners who pay the most into the pot feeling that they have a stake. Our crumbling public services increasingly aren't cutting it.