Helm News: 3 Things You Need To Know About Bonuses

Bonuses are a popular way of rewarding employees, but did you know that they can potentially lead to those receiving them paying more income tax? It is important that you understand how any increase in your total gross earnings will effectively increase your income tax rate.

Areas that could lead to you paying more income tax are:

1

Child Benefit

Those earning between £50,000 and £60,000 will lose 1% of Child Benefit for every £100 of total gross earnings over £50,000. Therefore the entire benefit could effectively be lost through additional income tax once total gross earnings reaches £60,000.

2

Tax Free Personal Allowance

Those with total gross earnings between £100,000 and £116,210 will lose £1 of the Tax Free Personal Allowance for every £2 of total gross earnings over £100,000 creating an effective tax rate of 60% on these earnings.

3

Additional Higher Rate Tax

Those with total gross earnings over £150,000 are taxed at 50% which is a 10% increase on earnings below £150,000. To best help prevent paying unnecessary income tax you should consider taking action before you receive your bonus.

For more information on bonuses, please contact Ed Smithson at ed.smithson@helmgodfrey.com or 020 7614 1026.

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