Yearly bonus... taxed very heavily

[t18con]

Just a quick question, probably a simple answer. I get paid a yearly bonus, this year it was close to £3000, but I've only ended up with £1800 home. My pay is in the region of 30k.

 

 

Why am I taxed so heavily? I know I'll get taxed on all of the bonus, but it seems way more than the 20% tax rate. Is it because the system is assuming I'll get paid at that rate for the remainder of the tax year, and I'll get some back next month? or what's going on??

[Sidewinder]

Looks about right to me. On a basic of £30k the tax rate would be 20%, but the £3k bonus pushes the annual income into the 40% bracket (above £31,785 for this year)

 

So - tax would be payable at 20% for the first £1785 of the bonus - £357

 

Tax payable at 40% for the remaining £1215 of the bonus - £486

 

Plus National Insurance at 12% payable on the entire £3000 - £360

 

Total deductions - £1203

 

Net Bonus - £1797

 

Harsh, but not wrong unfortunately....ad no rebate due either!

[JoeyJoeC]

Just curious, and don't have the time to do the math.. but would he have been better off if his wage + bonus was less than £31785?

[Emmzzi]

no, that is not how tax bands and percentages work.

[citizenB]

Seems very unfair

[goodatresearch]

Its £31,785 above the personal allowance. Therefore the OP is still in the 20% tax bracket. Any overpayment will be paid back eventually, either in dribs or drabs or after the end of the tax year.

 

Looks about right to me. On a basic of £30k the tax rate would be 20%, but the £3k bonus pushes the annual income into the 40% bracket (above £31,785 for this year)

 

So - tax would be payable at 20% for the first £1785 of the bonus - £357

 

Tax payable at 40% for the remaining £1215 of the bonus - £486

 

Plus National Insurance at 12% payable on the entire £3000 - £360

 

Total deductions - £1203

 

Net Bonus - £1797

 

Harsh, but not wrong unfortunately....ad no rebate due either!

[Sidewinder]

Whoops! My bad. In which case disregard my maths - OP, it seems that you may indeed be due a rebate!

 

Thought my figures calculated a little too neatly...

[slick132]

The PAYE system works on a "cumulative" basis so, each month, your total pay to date (since 6th April) is reduced by your tax free allowances for the year so far.

 

The same applies to the basic rate tax band which is £31,785. Each month, 1/12th of this (£2,648.75) is applied to the net pay after tax allowances.

 

For example :-

 

Pay date 30.9.15 (tax month 6 of 12)

Pay to date this tax year £18,000

Cumulative tax allowance = 6/12 x £10,600 = £5,300

Cumulative basic rate band = 6/12 x £31,785 = £15,892.50

 

Pay to date 18,000

Tax all'ce 5,300

Taxable 12,700 which is within the basic rate band.

Tax due to date 2,540

 

Class 1 NIC would be payable but this doesn't affect the tax bands.

 

I assume you're on a tax code of 1060L. Let us know if you're not as this will affect the case.