Tax and bonus

[PinkMimi]

Hello, I’m wondering if anyone has any idea how tax works when getting a bonus. My husband earns slightly less than the £50,271 tax threshold for 40%. He earns around £48,500 but often works overtime and is close but not over the threshold. In his job he also gets 2 x £750 bonus payments per year. Next month he’s due £750 extra plus an extra £400 in overtime. Would there be any benefit to splitting the £750.00 and £400.00 so it doesn’t all fall in one month? Is tax worked out over the year or would they tax more if his wage is usually £2900 per month say (I don’t know what it is but around that) but then it’s £4000 would it be better being £3300, how does tax work with bonuses? My husband said it evens out over the the year but I’m worried it doesn’t work like that? Thank you :-)

Morning love it all depends on his tax code. If its a cumulative tax code, its across the year however if its a week 1 month 1 it'll look up the month to month wage.

Hope this helps

It evens out over the tax year (April to March) but that does mean he might pay more tax in the month of his bonus, and then less tax in later months.

It will even out over the year.
NI is calculated month to month but that's actually lower for higher wages, so no benefit to splitting it

It will even out over the year but depending on what type of pension he has, he might not pay 40% tax anyway as if you have a defined benefit pension, you pay tax after pension contributions so he'd have to earn well over £50k for any of his earnings to be taxed at 40% (defined contribution doesn't work like this because he would pay 40% tax but gets tax relief on the money that goes into his pension, however he will need to do 'something' (not sure if it's a tax return or something else, but he can get the rest of his tax put into his pension).

If he pays pension from his salary, his taxable income will fall (PP above is only correct if he pays into a pension, such as a SIPP, from his net salary - that is unlikely from what you describe). That will then drop him back into the 20% band.

So, for example, if his gross income is £52,000, and his pension contributions are 5%, he’ll pay £2,600 into his pension and his income tax will be calculated as if he were earning £49,400.

if he doesn’t pay into a work-based pension, he should consider it both so that he has a pension and for the tax benefits.
all work-based pensions are deducted before tax. That includes defined contribution pensions.

That’s really helpful, thank you to everyone that replied, I really appreciate it :-)