Hiya,
First post here, so would like to draw on peoples experiences....
I am going to receive a one off payment of around £4000 as a bonus for a good year.
I earn about £50k and pay £8k maintenance at the moment as everything is PAYE.
Problem is - this payment will take me over the HRT threshold, so I will lose 40% of it in Tax, and 11% in NI ( I think ) - however if I let CMS know about it, they will do their usual and completely mess up their calculation..... but if I were to lose another 16% of it I'd lose over 67% of the payment!
I suspect what they will do is average over 2 months work out I earn an extra £2000 a month and then up the maintenance accordingly! This means I'd pay more in Maintenance over the 12 months than the bonus after tax and NI.....
In reality, it's more like an extra £333 per month I earn - but it's the first time I've had it in 3 years of working here - so I could argue it's £4000 over 36 months - or £111 a month.....
One of the questions they ask when submitting the form is "Do you expect this higher payment will be paid for more than 13 weeks - which of course the answer is no.
But I have absolutely NO confidence at all that this will not get completely messed up. I am on commission which means my salary fluctuates wildly anyhow....
Any suggestions how to handle it. And yes, over a 3 month period, it will up my salary by the 25% they all talk about - but not if assessed over the whole 12 months, then it will only be about 9%..
Suggestions / recommendations please. Do I wait and not declare it (not my preferred choice), Wait 3 months to show it's not a consistent payment and then let them know - or let them know straight away.
I rang them about 4 months ago to ask what I should do and they couldn't tell me. I would think the best way would be to be assessed on it next year... but that means not telling them, which is a breach of the rules...
Thank you.
Hi, yes unfortunately any bonuses,.pay rise or overtime means you have to pay more maintenance. Perhaps you can transfer the bonus into a pension?
I can do that yes - however as I lose 51% of it in Tax and NI I'm worried if I then do £1800 as a pension contribution, I will actually earn LESS that month than I would normally!!!
I am happy for it to be assessed and used as an average for the whole year - my issue is if they assess it over 2 months and use that as an "average" for my "new" wages.....
@cmsnightmare I advised them of a bonus payment and it resulted in an assessment that did not make sense and was more than it should have been, if it had been considered at end of year. My experience leads me to consider that if/when the same happens again I will leave till the end of year and let them pick it up then. It may not have the same relevance by end of year.
That is not necessarily advice to you, just saying what I would do, given your circumstances in hindsight......
Yes, sadly its what I am thinking too - I will get a letter from my Employer to point out (truthfully) it's the first time in 3 years I've had it and I am extremely unlikely to ever get it again....
I would suggest to be careful about their 25% tolerance rule. if your income increases by 25% then they expect you to report it to them. if you don't report and e.g. 6 months pass by, they may pick it up then increase and backdate your maintenance payments from the date you received bonus. they are known to do income checks throughout the year, and possibly more if ex partner keeps pushing them for it.
I can do that yes - however as I lose 51% of it in Tax and NI I'm worried if I then do £1800 as a pension contribution, I will actually earn LESS that month than I would normally!!!
I am happy for it to be assessed and used as an average for the whole year - my issue is if they assess it over 2 months and use that as an "average" for my "new" wages.....
As far as I am aware, any payment into a recognised pension does not attract tax and NI, ie I think you would get that back at the end of the next financial year (unless you can get your employer to pay it directly into your workplace pension, in which case the tax?NI relief will be immediate). That way, you are making the most of the bonus, and CMS won't include it in any calculation for maintenance
You are spot on...
But you don't get "back" the Tax and NI - as I understand it, the Tax and NI are added to the pension pot for you - so last year I paid £4000 odd in pension, and the GOVT made it up to about £4800 or so....
So yes, kinda I will get it back.... the pain is in the immediate now... So if I got a bonus of £4000 then I'm going to pay 40% tax on it, 11% NI (Is that right or will it be a lower rate ???) - so I'm left with £1900 thereabouts..... If I paid £1500 of it in Pension, then I'm left with £400 from a £4k bonus!!!
My fear is I will tell CMS, they will do their usual, average it over 2 months and go - "wayhey, you're new salary is £1400 a week (which of course it really really isn't) - your maintenance has gone up to £960 a month!!!! So well over double!!
What I intend to do is not pay ANY pension on the bonus, put it all into a savings account (what's left after tax and NI) and then pay big pension contributions the next 3 months - tell CMS of the bonus as soon as I get it, then IF they are idiots and whack up the maintenance to double or triple what it is now, at least I only have to pay it for 2 months before I can put in a salary 25% REDUCTION (because if I go from "Earning 6k a month" back to a normal salary of £3500 a month it will have easily crossed that 25% drop threshold) - then hopefully I will only have paid excessive maintenance for 2 months.... Plus I will appeal a silly increase.
I don't mind paying a sensible amount - I have earned the money so if they hit me with say another £40 a month for the rest of the year, I won't care, that will be fine and I'll just pay it.