Tax on signing Bonus

[lazygraduand]

Hi,

Would appreciate a bit of help. I'll be starting a new graduate job soon and as part of that will be paid a signing bonus in my first paycheck alongside normal salary etc. Wondering how this will be taxed- I've not really earned much (a few hundred) this tax year due to being very busy with final year university exams etc- will this first signing bonus be incorporated as a lump sum into my tax free earnings or will that tax free allowance be spread over the whole tax year and subsequently will the x% tax rate be taken out of the signing bonus. If that makes sense?

Thanks

[clarkey]

Just put all the details into here, or any other like it: http://www.uktaxcalculators.co.uk/

The bonus is salary. Tax is calculated on year to date earnings, year to date tax paid, and a pro-rata'd allowance. So depending on where you fall in various brackets, you may 'overpay' a little tax in this month, but then 'get it back' between now and April.....

No doubt someone will explain it more clearly than me!

[Eric Mc]

And NI'd

[Sarnie]

And Student Loan?

Edited by Sarnie on Monday 17th September 21:18

[lazygraduand]

Fair 'enuff! Was hoping to clear my overdraft in one fell swoop but it looks like that won't be possible. Thanks!

[lazygraduand]

And yes, all of those things- NI, Student Loan, and standard Income tax!

Not to mention VAT on everything I then buy, tax on petrol, beer...

[New POD]

lazygraduand said:

And yes, all of those things- NI, Student Loan, and standard Income tax!

Not to mention VAT on everything I then buy, tax on petrol, beer...

Welcome to the Adult world, where you are permanently skint, and there is no light at the end of the tunnel (I'll be rich when I graduate and get a job LOL)

[johnfm]

Thread resurrection...

how can a signing bonus be salary - if discretionary, you're being paid without providing any labour. Could it be an ex gratia payment and free of tax up to first £30k?

[Eric Mc]

If the payment is part of an employment contract, then it will be taxed as a salary payment. "Ex gratia2 should really be "unexpected" as in "Oh gosh, I wasn't expecting that". If it fails that test, it's not "ex gratia".

the rules on ex gratia payuments are being tightened up this year as such payments have been abused for decdes.

[johnfm]

Eric Mc said:

If the payment is part of an employment contract, then it will be taxed as a salary payment. "Ex gratia2 should really be "unexpected" as in "Oh gosh, I wasn't expecting that". If it fails that test, it's not "ex gratia".

the rules on ex gratia payuments are being tightened up this year as such payments have been abused for decdes.

Cheers Eric

I just cannot see how a negotiated termination settlement can benefit from ex gratia status (no tax up to £30k) but a negotiated 'welcome to the firm payment' cannot benefit from the same treatment?

[Eric Mc]

I think that is why the rules are being tightened. The £30,000 threshold (which is decades old and was once a very significant amount) has been abused for decades.

[98elise]

johnfm said:

Thread resurrection...

how can a signing bonus be salary - if discretionary, you're being paid without providing any labour. Could it be an ex gratia payment and free of tax up to first £30k?

If that was the case everyone would negotiate a salay of £1, with an ex-gratia payment to be made for 000's

[Eric Mc]

If it's negotiated, it can't be "ex gratia" - unless everybody lies about it, of course. in which case it become tax evasion and fraud..

[ringram]

New POD said:

Welcome to the Adult world, where you are permanently skint, and there is no light at the end of the tunnel (I'll be rich when I graduate and get a job LOL)

Thats a bit unfair. There is light. Just that the light is the oven fire at the crematorium. Thats when you are truely free

[Craig202]

lazygraduand said:

Hi,

Would appreciate a bit of help. I'll be starting a new graduate job soon and as part of that will be paid a signing bonus in my first paycheck alongside normal salary etc. Wondering how this will be taxed- I've not really earned much (a few hundred) this tax year due to being very busy with final year university exams etc- will this first signing bonus be incorporated as a lump sum into my tax free earnings or will that tax free allowance be spread over the whole tax year and subsequently will the x% tax rate be taken out of the signing bonus. If that makes sense?

Thanks

Like others said the bonus is still classed as salary, quite simply you just add everything together and deduct tax from that. Each person in the U.K has a personal allowance of £11,500, then tax is calculated as follows:

From £11,500 to £45,000 you'll pay 20% tax, and from £45,000 to £161,500 you'll pay 40% tax.

I'd use this site if I were you to calculate what you should be having deducted, https://www.income-tax.co.uk/ hope it helps you out. You just want to make sure you understand what should be getting deducted properly incase any tax mistakes are made, will be easier to rectify further down the line!

[Eric Mc]

And don't forget NI.

[spikedjack]

Craig202 said:

lazygraduand said:

Hi,

Would appreciate a bit of help. I'll be starting a new graduate job soon and as part of that will be paid a signing bonus in my first paycheck alongside normal salary etc. Wondering how this will be taxed- I've not really earned much (a few hundred) this tax year due to being very busy with final year university exams etc- will this first signing bonus be incorporated as a lump sum into my tax free earnings or will that tax free allowance be spread over the whole tax year and subsequently will the x% tax rate be taken out of the signing bonus. If that makes sense?

Thanks

Like others said the bonus is still classed as salary, quite simply you just add everything together and deduct tax from that. Each person in the U.K has a personal allowance of £11,500, then tax is calculated as follows:

From £11,500 to £45,000 you'll pay 20% tax, and from £45,000 to £161,500 you'll pay 40% tax.

I'd use this site if I were you to calculate what you should be having deducted, https://www.income-tax.co.uk/ hope it helps you out. You just want to make sure you understand what should be getting deducted properly incase any tax mistakes are made, will be easier to rectify further down the line!

Plus the incidental rate between 100-120k due to the loss of tax free allowance, effectively making it a 60% on the first 12k above 100k

[Jockman]

spikedjack said:

Plus the incidental rate between 100-120k due to the loss of tax free allowance, effectively making it a 60% on the first 12k above 100k

The bracket is £100k to £123k.

At a rate of £1 for every £2 the bracket will always be double the nil rate allowance, currently £11,500.