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?

Guess you didn't see my next comment...

And aren't poorer people told that they could earn more if they just worked harder, they choose to be poor?

Op chooses for both parents to work and pay childcare.

You have no idea of my life, job or wage😬

People can have differing opinions, it's not about being jealous and spiteful.

Jamie Diamon said it best that a balanced tax system is needed, and not just a tax the rich etc

I get it op. I'm sorry but just decline the bonus - agree with requesting some additional leave in lieu - possibly to be taken over two years to help out with those days when the dc are sick.

With your outgoings, I imagine things are indeed tight.

Loving how people assume that I’m jealous - haha nope, our combined income is significantly more than the OP FYI. I just don’t come on here complaining about having to pay tax on it. Either take the bonus and take the hit, or don’t. Or maybe donate it or something. Read the room folks

YANBU - I can't remember the sums, but if you earn £99,999 and get tax-free childcare, you'll be £6k worse off if you earn a pound more, and you won't be better off until you earn £120k.

Yes, it's a middle class problem, but totally mad, and based on various people deciding that £100k is "sounds like a lot of money".

I bet you wish you never asked now OP.

It isn't those earning just under 100k who are the issue when it comes to wealth inequality.

I agree with all of this

It's the system that's at fault here

No, again I think you’ve misunderstood. The outgoings are not as the OP had planned and not merely the consequence of her decisions. They’re the consequence of getting caught up in government policy when you have a relatively small change in circumstances. The OP was entitled to specific childcare costs help. The bonus would impact the childcare cost relief. Very few people could absorb the entire £3.8k per month childcare costs unexpectedly. What would the equivalent be in your situation? Maybe if you think that through it’ll make more sense.

So yes, rather embarrassing for you that you’re criticising the OP rather than recognising what the real problem is. You might not be jealous, but you certainly lack awareness.

Thank you for the ideas. I’m going to speak to my employer next week to see if there are any options and might ask to ‘buy’ some extra holiday to see if they will allow outside of the normal cycle.

failing that I will try charity or look into making a separate pension if those would work, as many have helpfully suggested.

whilst I’m grateful for the bonus which would have been very helpful, I’m more desperate to keep taxable pay under £100k.

Sure 👌🏼

Haven’t gone through all posts so not sure if it’s been suggested already - but have you looked at unpaid parental leave? You can take up to 4 weeks a year (in one week blocks) - so basically unpaid leave, but it’s a government scheme so your employer should agree to it…
so I would use the money to take some time off, and then stay under the threshold.

Fair enough, but that is a choice you are making.

@Girahim if someone earning 100k isn't comfortable supporting their family doesn't that just highlight how the situation has got? Earnings are also relative to where you live, 100k in London and south east for a family doesn't make you wealthy as housing is so expensive plus she's said she is paying very high childcare fees. The issues are with cost of childcare and cost of housing that have been allowed to get worse and worse under this government. Many people are not financially secure on salaries of 100k, with high outgoings (ie a big mortgage, bills, a car, childcare) it only takes a few things to go wrong or a redundancy to tip you into debt. In addition a system where if one parent earns 100k plus they loose full hours whereas 2 on 99k isn't fair. The issues are systemic. You are unfairly picking on the Op for asking a perfectly reasonable question in her circumstances rather than levelling your frustrations at the super rich who own all the assets in this country and powers that be that allowed this to happen.

*how bad the situation has got

How do you suggest the OP reduces her childcare costs which are her biggest outgoing?

I think the inequality in this country is so damaging for us all. Even the wealthy have poorer mental health when inequality is high. We need to be taxing wealth more, rather than income. But none of this is the OPs fault. Your idea of asking for it to go to the lowest paid member of staff is fab. Would give the OP a good feeling too.

In case helpful, here’s the link: https://www.gov.uk/parental-leave/entitlement

Gosh some horrible nasty comments here. I hope people who leave them are never in your shoes op. They just don't deserve it.

Why does MN hate high earning women so much, I wonder? We should be encouraging more women to earn as much as they can.

The 100k threshold is such an annoyance. I spent years pumping as much into the pension as was allowed to try and stay under it, but eventually had to give in and go part-time.

At work our bonuses can go straight into the pension, we just have to fill a simple form in.

Here here. The true wealth is in land, yet we have no Land Value Tax. Now, why is that and who benefits from this situation?

Taxing people's honest earnings is arguably a form of theft.

It might not be fab if it then puts them in a similar situation (not with the 100k thing, but with CTC / UC)

Honestly this. Pay it into your pension or refuse it.

How do you have no savings on this wage? The mind boggles.

Can’t help with the bonus question, my answer would be to decline the offer of a higher bonus than normal due to the tax implications.

But £350 for gas and electric? How is it that high if your children are in FT childcare and you are both at work? We work from home and ours is half of that.

If you could get that and the childcare lowered (no idea how it’s that high if you also get free hours) you would have a decent amount left per month.