Annual bonus payment

[InfoSeeker]

Is there any way to reduce the tax payable on an annual bonus, eg if someone was entitled to 15k then is the only option to run it through the employee's pay for that week/month and tax is payable on the full amount?

I suppose one way would be to make a large payment to your pension, eg if I was only paying 5% for the year but my age entitled me to pay 20% then could I use it to make a lump sum?

eg if I earn 100k and am entitled to pay 20k into pension but only pay 5k then can I use all of this 15K bonus to be put into my pension and thereby not have to pay tax on it, is this a legitimate transaction?

 

[Nige]

yep, pension is the way to go.

 

[capall]

If you have your own limited company and a company pension scheme you can put as much as you want into a pension scheme

If you are paying into a pension directly ,than the 15k gets paid out to you net of tax,you can contribute and get a tax deduction but you will only have 15k less tax to invest

 

[InfoSeeker]

I am a PAYE worker and the 5% payment for my pension that I make is automatically taken from my monthly gross wage.

I am not 100% sure how this 15K would be treated, ie does my employer have to put it through and therefore it will be taxed.

If this is the case then I can see purpose in making a pension payment myself as
it would be from my net pay or am I missing something obvious?

 

[ClubMan]

If it is going into your pension and does not cause you to breach your age related tax/PRSI relief limit then they can just pay it into your pension and reflect this on your payslip I presume so that you get tax/PRSI relief at source. Otherwise they will have to put it through payroll and deduct tax and PRSI and if you then contribute it to a pension then you need to claim this back manually.

 

[InfoSeeker]

That answers my query, apologies if it was a basic query but just wanted to be sure.

 

[boaber]

Some employers operate an Employee Share Ownership Scheme (which need to be approved by the Revenue)

Some or all of your bonus and also a possible salary sacrafice can be used to purchase shares, which, if they are held for 3 years, are not liable to income tax on disposal (only CGT)

When you sell the shares in 3 years time, you can then lob this into your pension.

Check if your employer has such a scheme - it may only be available to plc's though?

 

[asdfg]

Just to add, you can set it against your salary last year provided it is made before Oct 31 and make additional contributions for this year. A little messy.
I think it will have to go through payroll 2007 so therefore you receive net. You then write a cheque for the full amount (Gross) and advise your AVC provider that you want to offset it against 2006 income. You then apply for tax relief for 2006.
Net result should be the same, if you are earning 100K
You may have to use saving or a loan for a short period of time.