NI contribution on £15k annual bonus

[MB140]

Could someone who understands National Insurance and Income Tax matters explain to me how i calculate the tax and NI contributions to an annual bonus.

Current salary is circa £50k pa fixed (no overtime etc), just under the 40% income tax threshold. Ive just been told this morning that I am to receive a bonus of £15k in april 25 and another £15k in April 26. How do i go about working out how much of each bonus i will lose to NI, and is NI calculated pre income tax.

My workings (assuming all is in the 40 income tax bracket, which near as dam it it is)

My NI thinking, im NI category A so with a monthly pre tax income of £4194 just in to the upper level of NI and attracts an additional 2% over the standard 8% for all of the bonus therefore my total NI is 8% + 2% upper level NI for category A.

£15k - 40% income tax = £6k to taxman
£15k - 10% NI = £1500 to taxman

Total deductions = £7.5k to taxman

£15K - £7.5K = £7.5K actually in my pocket. Is this correct, do my calculations look about right.

Is there any ways to offset this, I don't have a private pension as i have a very good final salary none contributory pension though my current job which i will start collecting from age 50 until death, index linked.

For those with a financial background assume your talking to an idiot here, I have little to know understanding of investment / savings / tax stuff etc. I just put all my spare cash in to ISA Cash and premium bonds.

[Amateurish]

Your current take home should be £39,500.

A £15k bonus would take that to £48,250.

So you would see £8,750 extra in your pocket.

[MB140]

Amateurish said:

Your current take home should be £39,500.

A £15k bonus would take that to £48,250.

So you would see £8,750 extra in your pocket.

Thanks Amateurish, for my own benefit could you explain how you got to that number. More so I can understand my mistake. It’s such a minefield.

[AdamC28]

Your natioanal insurance contributions aren't 10% (8% + 2%).
Once your income goes above threshold national insurance contributions drop to 2% on any earning over threshold, not an additional 2%.

[MB140]

AdamC28 said:

Your natioanal insurance contributions aren't 10% (8% + 2%).
Once your income goes above threshold national insurance contributions drop to 2% on any earning over threshold, not an additional 2%.

Thanks Adam, that makes sense with the numbers above from Ameteurish.

[Amateurish]

MB140 said:

Thanks Amateurish, for my own benefit could you explain how you got to that number. More so I can understand my mistake. It’s such a minefield.

I just used an online calculator eg

https://www.moneysavingexpert.com/tax-calculator/

[MB140]

So having now established my tax requirements, could i start up a new pension and shift these two bonuses into a private pension and somehow claim the tax back.

There is no way of doing this with my employer pre tax deductions, as stated earlier, my pension is none contributory and as i only have 3-5 years left in my current job then buying additional contributions seems pointless as i would be drawing from my pension in 3-5 years (aged 50-53) so they would add little monetary value in that time as far as i can see. Besides the advice i have received in the past is that the additional voluntary contributions scheme doesn't offer great returns for investment.

In short is there a way to shift the full £15k in to a pension each year by claiming the tax break back.

Think i may need proper financial advise on this to be honest.

[LastPoster]

If you make a contribution to a pension using the numbers you have stated above, you wil get 20% Relief at Source. I.e added to the pension by the pension company and claimed back by then from the taxman. You will be able to claim the other 20% as a rebate from the taxman. You won’t be able to recover the NI

If you can get your employer to pay the bonus directly to your pension as salary sacrifice, you won’t pay any tax or NI in the first place. All 15k will go into your pension

Happy to be corrected on this bit but I believe NI is calculated per pay period rather than per annum so the deduction will only be 2% as it will be above the higher limit

[MB140]

LastPoster said:

If you make a contribution to a pension using the numbers you have stated above, you wil get 20% Relief at Source. I.e added to the pension by the pension company and claimed back by then from the taxman. You will be able to claim the other 20% as a rebate from the taxman. You won’t be able to recover the NI

If you can get your employer to pay the bonus directly to your pension as salary sacrifice, you won’t pay any tax or NI in the first place. All 15k will go into your pension

Happy to be corrected on this bit but I believe NI is calculated per pay period rather than per annum so the deduction will only be 2% as it will be above the higher limit

Thanks lastposter,

"If you can get your employer to pay the bonus directly to your pension as salary sacrifice, you won’t pay any tax or NI in the first place. All 15k will go into your pension"


This is not possible, I work in the public sector and therefore don't contribute to a pension, they have a system of making additional voluntary contributions to increase your pension on retirement but as stated earlier it is deemed my most people to be not worth while. There is no way of getting the money out without paying tax and NI as far as i know. So it looks like the only way is to set up a private pension and claim the 20% at source by the pension company and 20% from the taxman my self.

Seems like the loical thing to do. Might even be worth joining our pension society for £50 a year to see what there advice is.

[borcy]

I would look into the AVC it may work out, there are yt videos that look at putting extra funds in the scheme you're talking about.

All depends on how much and how long.

You can start a pension scheme but it does cost money to start and you might not have time to make good any losses.

[oop north]

LastPoster said:

Happy to be corrected on this bit but I believe NI is calculated per pay period rather than per annum so the deduction will only be 2% as it will be above the higher limit

Yes, NIC is (unless we are talking about earnings from a limited company in which you are a director) calculated by pay period and different from income tax (which is calculated annually) in that respect