Annual bonus/tax help please!

[gryffindorwannabe]

Can anyone shed any light? DH is due an annual bonus at end of this month, even with this bonus his annual salary is under the 40k threshold. However I understand that he will be taxed 40% of his wage and bonus this month? Will he be entitled to a 20% rebate? And if so when should this be paid?
Any help appreciated please!

Why will he be taxed at 40% this month? His employer should base his rate of tax on his year to date salary which isn't over the threshold.

That makes sense. It didn't really occur to me that he wouldn't be taxed 40%. Fingers crossed it all goes the way it should then!

He will probs get taxed 40% because, someone correct me if I'm wrong, they look at each months income and assume that it will be the same for each month of the year.

If its March 2016 pay you'll be able to get it back quite quickly after 6 April when the tax year ends. by phoning his tax office number on his payslip

Depends on a number of factors. Is his tax code Month 1 by any chance? If so, he will be taxed on the assumption that this would be his pay for every month and he will have to claim a tax refund after the end of the tax year.

Another possibility is that hi tax code may have changed to take account of other circumstances.

Why would his payroll department assume he was going to receive the bonus amount each month? They do know his normal salary - that is their job.

Tax codes are nothing to do with your payroll department - they are issued by HMRC and have to be operated whether they are correct or not.

Tax codes operate on the basis that everything is split evenly over 12 months. So everyone's tax free amount and lower tax rate band are split evenly across the year - if your earnings go above your 'normal' amount one month, nobody will know it's for one month only and so hmrc will duly adjust the code and issue to your payroll department. Logically, you will also have more income going against the same nil/lower rate band, so yes, some could fall into the higher rate band too.

He can call his tax office and explain his earnings or complete a tax return, which is looking at the entire year.

But please don't moan at payroll as they can only operate what they are told!

This is happening to my daughter this month. She has the chance of a lot of overtime, which will double her salary. If she earned that every month, she'd be on a higher rate. The agency have told her they will tax that month as though she earns that every month - I can't understand why they would do that, knowing it's overtime and a one off.

Tax is actually calculated on a year to date basis (provided you are not on a month 1 code). So in August for example, which is month 5 you would get 5/12ths of your tax allowance off your pay Apr to Aug. So if the bonus is paid in month 12, the tax will be calculated after giving the full years allowance against the total income paid that year, so if the bonus keeps this under the 40% threshold, you will just be taxed at normal rate. Will only be an issue is bonus is paid in earlier months.