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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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1. Are all bonus taxable? 2. My client received untaxed

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1. Are all bonus taxable?
2. My client received untaxed bonus, the bonus was paid into his pension funds.
3. On his self assessment tax return, the bonus is first posted as other income in box (other taxable income - before expenses and tax taken off). Is this the correct box?
4. Now that he has pay tax on the bonus, can he now claim "relief at source"? by posting the £53k + £13,250 in box (payment to a retirement annuity contract where basic rate tax relief will not be claimed by your provider). Is this the correct box?
5. By add the bonus to his total income for the year, he is now taxed at 40% and 45%.

Is your client employed or self-employed? Why was the bonus not taxed at source? Was it paid directly into the pension plan by the employer and, therefore, did not appear on a payslip? Alternatively, was it paid to your client who then paid it into their pension plan?

Are you sure the pension plan is a retirement annuity policy as opposed to a personal pension plan? Personal pension plans came into being on 1 July 1988. A retirement annuity plan could not be started after 30 June 1988, though it is still possible to contribute to a retirement annuity plan which commenced before 1 July 1988.
Customer: replied 2 years ago.


He is employed, the bonus was paid directly to him en he paid it into his OLD Mutual pension account. It's a personal pension plan.

The bonus wasn't on his payslip.



Leave this with me while I draft my answer.

Hi again.

Why the bonus was not taxed is beyond me. The employer may have some questions to answer from HMRC. The bonus should have been subjected to employer's NIC as well as tax and employee NIC.

The bonus is employment earnings and so I'd put it into box 3 of the SA103 employment pages.

You said the pension plan was a personal pension plan so contributions are made net of basic rate tax relief. In this case, the tax relief of £13,250 will be reclaimed by the pension plan provider. The gross pension payment of £66,250 should be put into box 1 on page TR4 of the core SA100 tax return.

The basic rate tax band will be extended by the gross pension payment of £66,250 assuming that your client has sufficient earnings to cover it and higher rate tax relief will be given. Bear in mind though that no tax was deducted from the bonus.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Hi Tony,

Thanks for the advice, it was very helpful.




Would you be kind enough to rate my answer before you leave please.
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Customer: replied 2 years ago.

new question

one of my client new partner is coming from Greece to live with her in the UK. He has a business in Greece, he will be paying tax on the profits from the business in Greece. Dividend will be transfer to his bank UK bank account. At the moment he is not working in the UK and not for the coming 6 months.

1. Does he have to register for self assessment to pay tax on the dividends?




Most foreign dividends are grossed up for UK tax purposes in the same way that UK dividends are as you will read in HS263 here. There is no further tax to pay if the recipient is a basic rate taxpayer.

From 6 April 2016, UK dividends will effectively be paid gross. THe 10% tax credit system will no longer operate. How foreign dividends will be treated remains to be seen and there may be some HMRC notes after the Autumn Statement on 25 November. If the Greek dividends are taxed in Greece, then the UK/Greece tax treaty will allow a credit against any liability to UK tax on those dividends. There will be a dividend allowance whereby the first £5,000 of dividends will be taxed at 0%. A basic rate taxpayer will have a 7.5% tax liability on the excess over £5,000. A 40% taxpayer will pay tax on dividends at the higher dividend rate of 32.5%.