Giving a bonus to an employee
Discussion
Whilst we are liaising with our accountant, just putting this out here as well for a wide mix of views and opinions.
We have an employee earning circa 108k per annum (we don't currently salary sacrifice this downwards). He is owed a bonus of around £3k, however, running the numbers through a tax calculator reveals that the tax man takes around 50-60% of this, leaving him with a small amount.
We have informally spoken about gifts and other means to reward him, but drawing a bit of a blank.
What other ways are there to reward this individual that may be more tax efficient. Stretching the rules or taking advantage of allowances or similar.
We have an employee earning circa 108k per annum (we don't currently salary sacrifice this downwards). He is owed a bonus of around £3k, however, running the numbers through a tax calculator reveals that the tax man takes around 50-60% of this, leaving him with a small amount.
We have informally spoken about gifts and other means to reward him, but drawing a bit of a blank.
What other ways are there to reward this individual that may be more tax efficient. Stretching the rules or taking advantage of allowances or similar.
Prisoner 24601 said:
Whilst we are liaising with our accountant, just putting this out here as well for a wide mix of views and opinions.
We have an employee earning circa 108k per annum (we don't currently salary sacrifice this downwards). He is owed a bonus of around £3k, however, running the numbers through a tax calculator reveals that the tax man takes around 50-60% of this, leaving him with a small amount.
We have informally spoken about gifts and other means to reward him, but drawing a bit of a blank.
What other ways are there to reward this individual that may be more tax efficient. Stretching the rules or taking advantage of allowances or similar.
Your accountant would probably be the best person to help.We have an employee earning circa 108k per annum (we don't currently salary sacrifice this downwards). He is owed a bonus of around £3k, however, running the numbers through a tax calculator reveals that the tax man takes around 50-60% of this, leaving him with a small amount.
We have informally spoken about gifts and other means to reward him, but drawing a bit of a blank.
What other ways are there to reward this individual that may be more tax efficient. Stretching the rules or taking advantage of allowances or similar.
The problem that you have is that the bonus is work related. Paying somebody for the work they have done is taxable. IIRC gifts are limited to £50 per occasion and £300 per annum.
stuthemongoose said:
The employee should be Sal sac the 8k to 100k to get 62% boost from gvmt.
The 3 k you give as a bonus they should do the same on
The best bonus/gift you can give this person is to explain how important pensions are and to use the allowances!
^^^ that. Offer to set up the salary sacrifice thing for them and shunt way more than £3k into their pensionThe 3 k you give as a bonus they should do the same on
The best bonus/gift you can give this person is to explain how important pensions are and to use the allowances!
I also did that for the last year or so that I worked when I became mortgage free.
Sacrificed everything above the upper tax threshhold.
IIRC I sacrificed around £3.5k/month & actually lost around £1.8k/month in take home due to the tax burden.
(don't quote me on specific numbers, they are just estimates IIRC)
It enormously benefitted my pension by the time I started taking it.
Sacrificed everything above the upper tax threshhold.
IIRC I sacrificed around £3.5k/month & actually lost around £1.8k/month in take home due to the tax burden.
(don't quote me on specific numbers, they are just estimates IIRC)
It enormously benefitted my pension by the time I started taking it.
As already mentioned, any gift over and above the very small HMRC allowance will be subject to tax, usually payable by the employer.
IIRC it is based on the highest rate of tax paid by the employee and the tax payable can sometimes be more than the value of the gift itself!
Getting a salary sacrifice scheme in place would be the way forward and for the £3000 and other pension payments to be paid this way.
IIRC it is based on the highest rate of tax paid by the employee and the tax payable can sometimes be more than the value of the gift itself!
Getting a salary sacrifice scheme in place would be the way forward and for the £3000 and other pension payments to be paid this way.
E-bmw said:
I also did that for the last year or so that I worked when I became mortgage free.
Sacrificed everything above the upper tax threshhold.
IIRC I sacrificed around £3.5k/month & actually lost around £1.8k/month in take home due to the tax burden.
(don't quote me on specific numbers, they are just estimates IIRC)
It enormously benefitted my pension by the time I started taking it.
As my intention is to retire in early 2028, I have ramped up my salary sacrifice into pension from everything above £50K to everything above minimum wage. Sacrificed everything above the upper tax threshhold.
IIRC I sacrificed around £3.5k/month & actually lost around £1.8k/month in take home due to the tax burden.
(don't quote me on specific numbers, they are just estimates IIRC)
It enormously benefitted my pension by the time I started taking it.
The shortfall is being met by using savings which weren't getting a great return. when I retire in Feb 28, I get it back at 25% tax free and then from April have £1k tax free (each month) and the rest minus 20% tax. Effectively I am pretty sure that I will pay £200 a month for a £3k net income.
I have a big spreadsheet with timings of every drawing down I plan for the first 25 years.....
352 working days left........
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