Bonus season in the corporate world is dangerous. A £30,000 gross bonus hits the payroll, and suddenly you are browsing the local Audi dealership. It feels like 'free money'.
But when you apply the brutal reality of the UK tax system, that £30,000 gross bonus might only translate to £14,000 in your bank account after tax, National Insurance, and student loans.
Bonuses are taxed at your marginal rate. If your bonus pushes you into the 60% tax trap (between £100,000 and £125,140), handing the majority of your hard-earned reward to HMRC is deeply demoralising. The Institute for Fiscal Studies highlights how marginal tax rates distort incentives for high earners.
If you don't use salary sacrifice to divert the bonus into your pension, you are sacrificing massive wealth-building potential. Here is the framework I give my clients for allocating net bonuses:
This 'Rule of Thirds' ensures you are building wealth while still enjoying the fruits of your labour. Never fund a depreciating asset with a one-off windfall. Start planning your bonuses better with our Wealth Leakage tool.
Apply this strategy to your own finances using our interactive tool below.
Enter your numbers to reveal the lifestyle creep silently eroding your high income.
Stop reading and start acting. Book a zero-obligation Chemistry Call to discuss how we can apply these frameworks to your specific situation.
