Tax Question

[htid]

I work for a small company and last year when I was given my christmas bonus, tax came off it, so I didn't actually get what my bonus was. No problems there, but this year I am getting the same amount and my boss said he would tell the accountant the amount I was getting as bonus and then pay me whatever extra the tax would be so that after it's taken off I would actually end up with the bonus amount.

I won't say how much the bonus is, but it was not more than £5000 and my boss is now saying that he will have to pay 31% of that to cover the 31% tax that will be taken off. Now I'm very confused why I would be taxed 31% as I'm a basic rate tax payer (20% right?) and my bonus would nowhere near take me into the next tax threshold (40% at £37,000) so where does this 31% come from? Surely it should be 20%?

[oolon]

Two words, National Insurance.

NI is income tax by another name, GB was so proud of his promise he would not raise income tax, right at the beginning he was asked what about NI and he would not comment. Actually the really bad thing about NI, is it is taken off Before and After you get paid. The company pays the same rate before hand. so infact its more like 42% more for the company to pay.... very generous of them. Interestingly for the employee NI become capped when you pay enough, though GB broke that tradition with the 1p increase that is levied like income tax on all pay. So the rates for an employee are more like 11%->31%->51%->41%->51% as you move up the tax brackets. And from a company whole tax point of view 22%->42%->62%->42%->52% notices the middle "squeeze" that is complained about. (BTW I am doing the figures in my head so they may be wrong, I use a program to do my tax return! I am not actually a high rate tax payer but they over charge me so its nice to claim back a few hundred quid every year).

[htid]

Two words, National Insurance.

NI is income tax by another name, GB was so proud of his promise he would not raise income tax, right at the beginning he was asked what about NI and he would not comment. Actually the really bad thing about NI, is it is taken off Before and After you get paid. The company pays the same rate before hand. so infact its more like 42% more for the company to pay.... very generous of them.

Doh! How did I not think of that? *facepalm*

[tiggerai]

Try having tax and Student loan taken off... bye bye 50%...

Bonuses are Taxable benefits... I'd be grateful that you get one...

[TheAnimus]

Try having tax and Student loan taken off... bye bye 50%...

Bonuses are Taxable benefits... I'd be grateful that you get one...

Try having student loan payments to make, NI companies, NI personal, CGT, Income........

Its just far too much crap that makes me sad to read up on. Luckily my account works it all out for me, but i'm always mortified by how much the tax is, 50% ain't too bad end to end.

But hey someone has to pay for those who just don't feel like working, those who want to live in silly state funded job land, bless em!

[htid]

Try having tax and Student loan taken off... bye bye 50%...

Bonuses are Taxable benefits... I'd be grateful that you get one...

I do have tax and student loan but it only works out to 40%, where does 50% come from?

20% Tax
11% NI
9% SL

That's what mine works out at anyway. And I am grateful, especially that they are going to go ahead and pay all the tax as they originally said Having said that, I get paid nowhere near what I could/should be getting paid for my job considering it's London...I could probably earn 6k more, but hey I love the company and the people I work with so I'm happy where I am, just nice to know I'm appreciated