Irwin Mitchell Private Wealth Warns On Tax And Investment Implications
A record £46.6bn in bonuses was paid to staff during the last financial year, the government has revealed.
The Office of National Statistics has released the findings of its Average Weekly Earnings survey which show there was a 6.5 per cent increase in the amount of money handed to employees as a lump sum in recognition of their work.
The findings, which are for the period April 2016 to March 2017, have prompted a private wealth expert at Irwin Mitchell to predict a shift towards a bonus culture and a move away from workers receiving a fixed annual salary increase.
The private sector saw an increase in the amount of bonuses awarded, with bonuses increasing to £45.7bn, up 6.5% from the previous year. The biggest contributor to bonuses during the time period was the financial and insurance activities industry, which paid out £15bn in bonuses – an increase of almost 10% from the previous year.
The previous year’s survey also reported the highest ever bonus on record, suggesting that bonuses are becoming increasingly common for the average worker as well as the ‘high-flyers’ in the UK economy. The average bonus at the whole economy level averaged out to £1,600, but in other sectors, particularly private ones, the average will be significantly higher.
This increase in bonuses for the second year running suggests an increasing amount of the UK population is receiving a bonus.
Nick Rucker, National Head of Tax, Trusts and Estates at Irwin Mitchell Private Wealth, commented: “The ONS figures suggest to us a shift towards ‘bonus culture’, or receiving a lump sum as bonus instead of a fixed salary increase. Either way, bonuses are not going to be disappearing any time soon, particularly for the private sectors.
“With more people than ever receiving bonuses, it’s important to note how this lump sum is treated. For a start bonuses are treated as normal wages by the HMRC and so are subject to National Insurance and income tax. The higher the bonus, the higher the tax will be.
“There are many investment options open to those lucky enough to receive a bonus, who might want to invest in a business, look into stocks and shares, or use the money for their family such as paying for their children’s education or perhaps saving towards a house deposit or for retirement.
“Whether considering short-term or long-term options, Irwin Mitchell Private Wealth advises that leaving a bonus in cash form may not be the most fruitful move. Seeking a solicitor’s advice on what to do with your bonus and to advise on any tax breaks available can help to make sure your bonus is working as hard as it can for you.”