Do you understand how PAYE works?

[Merryoldgoat]

Just that really.

I run payroll and get queries which, to me, seem pretty basic. However as I understand tax I can’t decide if I’m being unreasonable getting irritated.

eg. Someone (a higher rate tax payer) wondering why they have paid an additional £400 in tax after getting a £1000 bonus.

To me that seems completely obvious but maybe it’s not.

so:

YABU - I get paid via a payroll and don’t understand how PAYE tax works

YANBU - I get paid via a payroll and understand how tax works and would expect tax to increase with additional payments.

8% of £300k isn't £4k?

The key is qualifying earnings - and their qualifying earnings are not the full £300K. And lots of companies do not pay pension contributions on bonuses.

It's pretty unusual for something described as "basic salary" to not also be the qualifying earnings to be honest. So I can understand why they might be confused by that.

No, I've never seen any employer pay pension on bonus, though most (not DB schemes) allow the ee to sacrifice it.

Just to answer a few questions:

Yes - it’s part of my job to answer questions but the questions are always asked as if I’ve made a mistake which is irritating but there are several suggestions on here regarding training and education which I’m going to implement and incorporate into new employee inductions and put some resources on the intranet.

We do not have lots of big earners - one person over £100k, one around the £90k, the rest is a spread from £30k to £70k ish so not many affected by some of the issues mentioned earlier.

It's pretty unusual for something described as "basic salary" to not also be the qualifying earnings to be honest.

Not really. It’s pretty common. It’s the easiest - and government sanctioned- way for an employer to contribute less to pensions, thus saving them money. The upper limit for ‘qualifying earnings’ is just over £50K. Above that, it’s not mandatory for an employer to pay contributions into a pension. Of course any decent employer who wants to retain high earning staff will have a better pension provision as a benefit of the job, you’d hope. But there are absolutely loads of SME businesses that only pay pension contributions to the mandatory level, that is 3% on qualifying earnings between £6K and £50K.

Quote the whole post again. Then you’ll see that I said marginal rates can mean…… you are wrong. Jumped in and can’t back down. You’re talking to someone who has lived experience of having to turn their bonus into pension because an extra 20k would mean LESS income. It’s all in the article linked and numerous more. You were and still are wrong. Unintentionally proving op’s point 👏🏻

It really isn't. Badic salary is used to describe the amount you are paid before any overtime, bonus or allowances. When referring to pension qualifying earnings is used to describe the amount of your salary that qualifies for pension contributions. As the law stands an employer only has to pay 3% to your pension on earnings between £6240 and £50270 so a huge amount of some people's salary wouldn't attract any pension contributions.

Yes that catches out many people -when I did payroll I used to send emails to the £100k range people to remind them they need to do a tax return and probably pay extra tax
I have also done the workings to show them the advantage of putting anything over £100k into a pension. Everyone I have showed has done it.

Luckily our bonus is paid March so doesn't screw up other months net pay
'

I literally quoted you and the bit I was arguing against. You do not take home less when your pay goes up, that never happens - that's what my post said. That's what I said and it's correct.

I don't care what you think, in your weird little world where other costs seem to impact take home pay, but it needs to be right for anyone else reading.

You said you take home less on £125k than on £99k. You don't.

What you meant was "due to potential reduction in other areas or benefits outside of your take home, such as the free childcare (if you need it, which not everyone does) your own personal marginal rate may increase such that you might be worse off". Not that you take home less.

I'm really sorry you're not able to explain yourself properly but hopefully I've helped you for next time you start talking about this.

Here is my original post you waded in on with no knowledge of the actual problem.

It isn’t that that causes the problem. It was the withdrawal of everything else which caused marginal rates of almost 70-90%. This is now at 100k and you can have marginal rates of 100%+. In essence, you can take home less on 125k in comparison to 99k.

The 100k and the issue around it catch a lot of people out. Relevant to the op. It’s not my fault you didn’t understand it and appear to be on a crusade of trying to be right when you’re very wrong. The words can are applicable in my original post. What is they say about reading comprehension in the UK again? The 70 - 90 % is accurate. With withdrawal of personal allowance, NI and then SL if you have one. 100+ if you have childcare.

I’m sorry the marginal rate on a decent salary isn’t something you appear to understand. Maybe one day.

And clearly I was ONLY commenting on your claim that you can take home less, that was what I commented on.

As I said. Clearly.

And you do. Hence the marginal rate.

Your monthly take home can do some strange things through PAYE though.

Say you get a large bonus. It is assumed for PAYE purposes this is now your monthly salary - so you might be overtaxed on it.

This is then paid back to you over the remainder of the year, so the amount you receive each month doesn’t match online calculators.

I tend to get a bonus in month 1 each year, and it messes with my PAYE earnings for the rest of the year.

Any company that only bases its pensions contribution on qualifying earnings isn’t worth working for, and I find it hard to believe that anyone on £300k is auto enrolled on those terms. If nothing else they’d be subject to tapering on that salary. Agreed that bonuses are seldom pensionable

It’s very easy in HMRCs app to update what you think your ful year earning will be, and that automatically updates your tax code. So it should be sorted pretty quickly surely?

I have income from 3 employers, one of which pays reasonably chunky bonuses and am an additional rate taxpayer - even so, bar NI which requires a certain form/declaration every year it’s easy to make sure that tax codes and tax are correct, monthly if necessary.

Most people have below average numeracy skills so it doesn’t surprise me I’m afraid