Tax on bonuses - flat rate equivalent

[Mumsanetta]

Please can I have some help with two questions.

1. I earn over £150k and have just completed my self-assessment which shows I owe £5k in tax. I have one job and on PAYE so wasn’t expecting to owe tax but turns out HMRC put me on the wrong tax code. I have not recently changed jobs. My employer is telling me that it’s not their fault and there’s nothing they can do about it and I haven’t been able to get through to HMRC to discuss what has happened and how I can avoid this happening in the future. Is a wrong tax code just human error? It doesn’t seem fair!
2. I am due to earn a bonus of £7.5k. I had ear marked it to fix my leaking roof but will need to apply it against the tax bill. Can anyone tell me what the flat rate of tax is on bonuses for high earners? Google tells me that I will pay the equivalent of 60% of tax on the bonus but that doesn’t seem right.

We just had the same thing happen except ours is a more palatable 1.6k which we can pay out of his salary from April. I think PP is right, this arrangement via self assesment has to be done online before 31st Dec, and I think the max amount is quite low, 5k sounds right. So my OH said two things:

At the start of the year the tax office never know what bonus you are going to get. Because of the various personal limits and tapering they have to do, they do this by adjusting your tax code throughout the year. He has had a couple, and a couple of times they started taking extra money. But then it got to the tax return which he is obliged to do (just over 100k) and they now know he had the bonus but I guess they didn't know quickly enough to get all the tax back before April. Basically, they are rubbish at tapering personal allowances.

The second thing is that it turns out the £50 a month on his pay slip for a mobile phone isn't actually taxed by his employer, so they are taking tax for that too. Deeply unclear on his pay slip.

We have had tax changes three times this year:

His employer forgot to include a voucher bonus on payslips, HMRC then took £34 a month for several months.

Then we had to pay tax for health and dental they had thus far failed to tax, the amount was about £178 but for some utterly bizarre reason, they are taking £66 a month for 8 months. I can't even...

Then, finally, the December 'you owe us 1.6k' at the end of the year, which they will take from April at £134 a month.

The OH tells me that he won't have to submit a self assessment next year because that is changing (under 150k) but we should expect these frequent pay amount changes to continue, because that system is not going to change.

I suggest you prepare yourself for this to happen in future years if you are likely to continue to get bonuses.

I hate their systems. They don't even tell you what you haven't been taxed on. We have spent six hours this year trying to figure it out for ourselves, because when he tries to call them, he is on hold for an hour then gets cut off.

I feel your pain @KievLoverTwo
My OH’s pay has been all over the place because of bonuses and they started randomly taking more tax in November because of a bonus he got in July and he STILL has to pay more tax through his code next tax year.
After many, many calls and online chats it transpires they couldn’t tax him the full amount in July as it would have meant he would have been taxed more than 50% of his salary, so apparently they sort this but taking random amounts for god knows how long with no notice 😩
oh and he completed his tax return in plenty of time and selected and met all criteria to pay it back though his code and they still sent him a bill asking for the full amount upfront.
It has taken hours to sort out with them changing his tax code about 4 times in the process.
I still won’t be surprised if he gets a late payment charge come Jan!

Thanks for typing all that out. I will warn him not to be surprised if he gets a demand, it will help with the shock.

Sounds like phone calls might be a waste of time and just to let them take what they want when they want it will give us an easier life. And to stash cash away for demands. Which I hope won't be 7k.

Also feeling your pain - we had this last year as DH had a redundancy payment in July, then a bonus in December which completely and utterly screwed his take home. Despite HMRC claiming that changes would take effect immediately when his tax code was changed, each time it seemed to take about 3 months for it to feed through to his employer (so he carried on underpaying tax, then massively overpaid for a three months until the system caught up and eventually got sorted out in his tax return).

What we learned from this was that (a) we needed to keep a buffer in case this happens again (we'd just moved house last year so coffers were very low and then he was underpaid by what amounted to thousands overall so it was a bit tight for a while!) and (b) whatever they say, so a SA return as it is a chance to double check HMRC's figures for the year!