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?

People on £25k aren’t net contributors. They won’t be funding the OP.

There’s a section on the tax return for any giving you’ve done which was gift aided. You then get a tax credit yourself for it.

@TheIndecisiveElf

the cost quoted is BEFORE free hours and tax free childcare

I’m sorry that you think people with principles are idiots. I was vehemently opposed to CB being based on one salary rather than household income, so I put my money where my mouth is and when our household income reached the threshold, we stopped claiming. Also wrote to my local MP asking for it to be reviewed in Parliament.

Either person can put the £23k into their pension

If done via salary sacrifice you also save ni (2% but employer saves 13.8% so benefits more)
If done directly you write a cheque for the net amount (20% less) and claim rest via your tax return and get a repayment.

So anyone can do it. Most companies offer salary sacrifice for pensions to save themselves 13.8% ni cost (mine nicely also puts that ni into the pension too)

In a time when many people are struggling to pay rent and provide food for their children, didn't you consider sharing your income and your bonus could have been considered a little tone deaf?

It’s a shame for you only earning 170k. My lifestyle is much more glamorous in the upper echelons of the top 1%.

Come on at least admit you made up the 70k thing/ requoted it from someone else making it up.

Of course we have such a thing as net income taxes. OP is due to pay £25,850 in income taxes, and then directly receives £4k reduction in tax from TFC, then receives a benefit worth £7k - making her net contribution £15k. That’s how net figures work.

If you discount the reductions from her actual payments, then you can’t argue she’d be paying more tax if the deductions cease - it can’t work one way and not the other.

Are you hard of understanding? OP doesn’t pay tax on £100k, she pays tax on £96k, so that she can also claim additional reductions and benefits. We’re discussing OP, not other people.

Was going to suggest you direct all of it as a salary sacrifice into your pension- then realised this had already been suggested (as I stopped reading the thread after the inevitable marks comments about diamond shoes). That’s what I’d do.

Not sure whether your idea of everyone being entitled to receive free childcare (or any other benefit/taxpayer funded benefit) falls under socialism - the same for everyone, or conservatism - giving more free stuff to people who are already wealthy.

You’re right, they’re net recipients, but they still pay taxes in to the pot and many won’t be taking anything out directly.

Why would I lie?

There are easily searchable articles you can check.

Nor am I, but perhaps that's because it's so utterly unimportant that I haven't devoted any thought at all to it.

But it's not an idea I personally deserve credit for, you pay me too much of a compliment there. I didn't come up with the idea of providing state pensions, statutory sick pay, DLA, PIP, statutory maternity and paternity pay, 15 free hours at 3 etc regardless of recipient income. Those things have existed for a long time and even in just a UK context have been provided by administrations of different political stripes.

Take them out of private school then!

I live in one of the most expensive cities in the UK. I get it. But ”I’ve got no money because I’ve spent it on luxuries”. Give over.

Op asking a genuine taxation question- on a forum. She is coming across a lot better than those who can read the clear title- yet come on here to tear another woman down for earning more. I almost can’t see with the bile being spewed across the thread. Some posters are coming across hideously. It takes a special kind of hatred to behave this way.

Myabe MN should rename itself to UC claimants net. The only people seemingly allowed to post. She asked for tax advice - not your hatred towards successful women.

She didn’t ask for your discussion. She asked for tax advice.

And my tax advice would be pay it, fund public services.

Then that’s why you don’t earn like the op. Of course you’d advise someone else paying over 100% and ending up at loss. Maybe spend more time thinking and less giving poor advice on stuff you know nothing about. You maybe happier and more productive. Who knows.

There have been so many creative suggestions about tax avoidance. It's been most illuminating.

I understand perfectly well. You were the one that manipulated the figures by conveniently ignoring the OP’s substantial national insurance payments. What was your reason for doing that?!

TBF people on the lowest incomes don't usually think like that either. The average NMW UC recipient has more financial savvy than to work for no real benefit either. Having been in more income deciles than most, I know!

Anyway op. Looks like some income tax cuts could be coming in the budget. 😁

Yep. The old 16 hours. Anyone who thinks that you should financially be thousands worse off for working. Really isn’t someone to have a rational conversation with about economics. Not that’s it’s needed. Hopefully op takes the correct tax advice she came here for.

Is this sarcasm? If so, tax avoidance is legal.