Bonus / Tax question

[130R]

Does anyone know (given the option) - as a higher rate taxpayer is it better to take a bonus payment at the end of March 2013 or defer it until end of April 2013?

[AyBee]

Assumng you earn the same every year (i.e. you're in the 40% bracket this year and next), it won't make a difference AFAIK.

[mrmr96]

AyBee said:

Assumng you earn the same every year (i.e. you're in the 40% bracket this year and next), it won't make a difference AFAIK.

I agree.

As an aside, if the bonus would take you into the 40% band, then you're better having it sooner than later. Else it would cause you to overpay your tax and it would unwind monthly. So it's cash advantageous to do it sooner. (Also assumes no other income and no self assessment.)

[130R]

Thanks

[steve999]

One exception is that for earnings over £150k tax rate reduces from 50% to 45% for tax year 13/14. If the bonus would put you above £150k, better to be paid after April 6th 2013.

[Eric Mc]

Also there may be an increase in personal tax alloowances for tax year 2013/14. I would wait until we hear the Chancellor's Autumn Statement in a few week's time before making a final decision.

[mrmr96]

Eric Mc said:

Also there may be an increase in personal tax alloowances for tax year 2013/14. I would wait until we hear the Chancellor's Autumn Statement in a few week's time before making a final decision.

If he's already a top rate tax payer then the change in PA won't make any difference to the decision on when to take his bonus?

ETA assuming his top rate status is not marginal, so the new PA won't stop him being a top rate payer.

[Eric Mc]

The top rate may change or there may be changes to NI rates or thresholds - so waiting a few weeks until we know where things stand after 5 April might still be worthwhile.

Edited by Eric Mc on Thursday 8th November 20:07

[mrmr96]

Fair enough.

[wattsm666]

There is also a nasty marginal tax rate of 60% at £100k to £112k. That might come into play.

[anonymous-user]

wattsm666 said:

There is also a nasty marginal tax rate of 60% at £100k to £112k. That might come into play.

£100k to 116k now. Tax free income was raised to just over £8k last year and it tapers off at £1 every £2 earned over £100k. If they raise the tax free threshold even more it will get even worse

Edited to add that I've just asked work if I can move to a 4 day week - I can't face the 5 th day being taxed at 60%

Edited by anonymous-user on Thursday 8th November 20:58

[sumo69]

The tax free allowance for 2013/14 was announced ages ago - it will be £9105.

The 60% band is thus £100000 to £118210.

Re OP's query,unless the bonus is taking you above £100k theres no disadavantage in taking it this tax year.

David

[jwo]

Tax free allowance raised but threshold between 20% and 40% decreased to circa £32k.... Just take bonus and don't look at the tax paid......!