One-off Bonus & Tax

[pete_esp]

Morning all!

I have just received a one-off bonus in my wage this month (My first one ever!) and I have noticed that 50% of it has gone in tax. Now, is this right or has HMRC looked at this and decided that this months wage will be my new normal monthly salary and has therefore bumped me up a tax band or 2 and hence I should submit a self assessment or something?

I would ask HMRC, but figure the probability of getting the correct answer here is higher!

[Cats_pyjamas]

I'm guessing your are PAYE.

The tax will normalise over the course of the FY (ie you may pay less tax over the coming months, earnings dependent).

You could salary sacrifice to offset the tax, ie increase pension contributions, c2w, company share scheme, leave purchase.

I've paid £3k tax in one month and then £200 the next because of pay fluctuations.

[phil-sti]

pete_esp said:

Morning all!

I have just received a one-off bonus in my wage this month (My first one ever!) and I have noticed that 50% of it has gone in tax. Now, is this right or has HMRC looked at this and decided that this months wage will be my new normal monthly salary and has therefore bumped me up a tax band or 2 and hence I should submit a self assessment or something?

I would ask HMRC, but figure the probability of getting the correct answer here is higher!

you shouldnt have to submit a self assesment if you are PAYE, unless someone in your household is in receipt of family tax credit?

[Rufus Stone]

pete_esp said:

Morning all!

I have just received a one-off bonus in my wage this month (My first one ever!) and I have noticed that 50% of it has gone in tax. Now, is this right or has HMRC looked at this and decided that this months wage will be my new normal monthly salary and has therefore bumped me up a tax band or 2 and hence I should submit a self assessment or something?

I would ask HMRC, but figure the probability of getting the correct answer here is higher!

Not HMRC, this is how paye payroll works. It is assumes you will receive this level of pay for the rest of the tax year and taxes you accordingly. You will automatically get any overpayment back over the rent of the tax year.

One off bonuses are better paid in March for this reason.

[okgo]

phil-sti said:

you shouldnt have to submit a self assesment if you are PAYE, unless someone in your household is in receipt of family tax credit?

Or you have higher earnings.

HMRC allow you to manually override your expected earnings. That could help OP. You have to log into your gateway.

[The Ferret]

okgo said:

Or you have higher earnings.

HMRC allow you to manually override your expected earnings. That could help OP. You have to log into your gateway.

I don't think logging in and over-riding anything will do anything in this instance.

It sounds as if the OP is a basic rate tax payer and this bonus has caused the payroll software to push him into 40% tax this month.

Updating his earnings won't do anything to solve that, his tax code will remain the same. He needs to simply wait until next month when his wages go back to normal and the tax is refunded. From July it should then remain stable.

Updating expected earnings is more applicable if you are going to earn over £100k or are currently being taxed as such but know you won't end up earning over. It doesn't sound like the case here, as he would be used to paying nearly half his salary in PAYE already.

[LastPoster]

okgo said:

phil-sti said:

you shouldnt have to submit a self assesment if you are PAYE, unless someone in your household is in receipt of family tax credit?

Or you have higher earnings.

HMRC allow you to manually override your expected earnings. That could help OP. You have to log into your gateway.

Or a multitude of other reasons (pension contributions, allowable expenses claim, HICBC, charitable donations etc etc)

[pete_esp]

Thanks all!

I have a good idea of what I must do now and had no idea it was an option. Great work

[pete_esp]

To conclude, HMRC sent me a message last night to inform me that my tax code had changed and to log in and check.

Looks like I’ll be overriding the tax code manually.

[havoc]

Rufus Stone said:

Not HMRC, this is how paye payroll works. It is assumes you will receive this level of pay for the rest of the tax year and taxes you accordingly. You will automatically get any overpayment back over the rent of the tax year.

One off bonuses are better paid in March for this reason.

This.

It's crap, but nowhere seems to be able to work out it's a one-off.

You SHOULD (as long as your payroll bureau / payroll team are decent) get it all back over the course of the year as the system sees your pay normalise down. But it's probably worth doing a calculation in April (or asking a financially-savvy friend to) to confirm that your P60 does add-up properly. (Twice I've had it where I've overpaid several hundred in tax because the payroll team/system were st)


Edit 1: IIRC you can't override the tax code manually - you need to call HMRC and explain things to them. It may well be a frustrating call (they're not always experts even though they think they are), but stick with it.

Edit 2: Unless you've a compelling reason to (like discovering you've overpaid tax), I'd steer clear of Self Assessment - once in there they expect you to submit every year, it becomes a minor ball-ache.

Edited by havoc on Saturday 25th May 09:23