Question on PAYE tax for bonuses paid at the start of the year.
We've received our bonuses for last year with our April monthly pay, but looking at the figures the income tax has been calculated based on:
Annualised figure = 12x April pay (including bonus)
Income Tax estimate for full year based on annualised pay
Income Tax in April = 1/12th of Annual estimate
So the estimated tax due has been calculated based on a full-year estimate that includes receiving the bonus in every month... for many, this pushes people into a higher tax bracket (20% to 40%, or 40% to 45%).
Is this "normal"? It's the first time I've been paid an annual bonus in April, and I was instead expecting my tax to go up by my marginal rate of tax and NI; not the rate in the tax band above my marginal rate. I realise I will probably get it drip-fed back in the balance of the year, as the annual estimate of earnings comes down.
We've received our bonuses for last year with our April monthly pay, but looking at the figures the income tax has been calculated based on:
Annualised figure = 12x April pay (including bonus)
Income Tax estimate for full year based on annualised pay
Income Tax in April = 1/12th of Annual estimate
So the estimated tax due has been calculated based on a full-year estimate that includes receiving the bonus in every month... for many, this pushes people into a higher tax bracket (20% to 40%, or 40% to 45%).
Is this "normal"? It's the first time I've been paid an annual bonus in April, and I was instead expecting my tax to go up by my marginal rate of tax and NI; not the rate in the tax band above my marginal rate. I realise I will probably get it drip-fed back in the balance of the year, as the annual estimate of earnings comes down.