Tax on bonus

[loveawineloveacrisp]

Any tax experts out there? I'm about to get a bonus from a job I left at the end of last year. I haven't worked since but I start a new job soon (probably not relevant to the question). The bonus is payable in the new tax year. How is it likely to be taxed? At 40% as the assumption will be that my annual salary is higher? (Bonus is around £6.5k).

Not possible to tell from the info without knowing your salary for the 25/26 tax year (which starts tomorrow). In the month you receive it, it will be taxed assuming you earn that much every month then if you have incorrectly paid too much at the higher rate of 40% it’ll usually be corrected in following months, or if not you’ll get a rebate at the end of the year. Across the whole tax year, you’ll be taxed on your total taxable income at the applicable tax rates on the hmrc website.

25/26 tax year salary is £65k. But I won't get paid any of that until end of April. Bonus payable mid April.

The amount of tax deducted depends on the tax code used.

Employers who pay ex-employees after they have left (and been give a P45) should use the tax code 0T on a week1/month1 basis.

This means you dont get any personal allowance and the tax is calculated using the weekly or monthly bands.

So, assuming a monthly pay period i think the tax will be 20% on £3,412 (37,700/12) and 40% on the rest

25/26 tax year salary is £65k. But I won't get paid any of that until end of April

This doesn't make any sense.

What tax year will the bonus be payable in?
What is your total income in that tax year?

Bonus is from last job which I've left but will be payable in new tax year. I start a new job next week and will be paid for that at the end of April. Old salary (old job) was £55k.

So you were already in the 40% tax and still will be when your bonus is added to your new salary amount, so you'll be taxed at 40%.

Unless I'm missing something?

@Butterflyfern yes, I was already paying 40% tax. But I haven't earnt anything since the end of November so I assumed I'd get a new personal tax allowance as the bonus is being paid in the new tax year.

So if the bonus is payable in the 25/26 tax year, what will be the total income for that tax year.

The key is that tax is calculated per tax year.

Your tax may not be deducted equally across the year as assumptions have to be made but if you have under or overpaid at the end of the tax year, it is adjusted so you pay the right amount of tax based on the amount you earned in that tax year.

This is the first income of that tax year. After that it'll be 65k per year but they won't know that yet will they?

Ah, it’ll likely be taxed with an emergency tax code as above. But as your salary is £65k, and assuming pension contributions don’t put you under the higher rate threshold, the whole bonus should be taxed at 40%. So you will have to pay more tax on income later in the year to make up for it. It’s a shame you didn’t receive it before now as you’ll end up paying much more tax on it because of timing!

@RaspberryRipple2 why would I pay more tax on income later in the year to make up for it?

Just resurrecting this as I've got my payslip and I've paid around 33% tax on an emergency tax code. V confused and hoping they haven't overpaid me.