Bonus Planning
You and your team have had a great year, and you want to reward your staff with a discretionary bonus. Say your bonus pool is £1,000,000.
QUESTION - How much of this £1m would your employees actually receive after tax and employee and employer National Insurance?
ANSWER - If all your employees are 40% taxpayers, the employees will actually receive approximately £532,000 net, or 53% of the total bonus pool.
So are there any alternatives?
There are alternative reward structures that can be used to reward your staff that are much more tax efficient than a straightforward bonus.
Your employees could receive 88% of the bonus pool, as opposed to 53%.
But beware...
There are a multitude of service providers who claim to offer tax efficient bonus strategies, and it is important to distinguish those strategies that are based on a true understanding of the legislation and those that are based on wishful thinking. In our view, a large number of these strategies are too risky, and will result in stress, hassle and the payment of further tax.
However, we do believe that some of the strategies are based on a proper understanding of the legislation, and indeed, some of them are less contentious than you might think.
If you would like to talk to us about tax efficient Bonus Planning, please call us on 01553 630310. Alternatively, please complete the attached questionnaire, and we will contact you as soon as we can.
