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How to get the most out of a bonus

Use or hold a bonus tax efficiently to get the most out of the money
How to get the most out of a bonus
  • A bonus can be a good way to retire expensive debts
  • One of the most tax-efficient ways to invest a bonus is to put it into your workplace pension via salary sacrifice
  • But don't breach the annual and lifetime pensions allowance limits

If you receive a bonus on top of your annual pay it should be a welcome additional boost to your finances. However, to get the full benefits of it you should use and or hold the extra money in the most efficient way.

Ensure that HM Revenue & Customs (HMRC) doesn’t think you earn more than you do. It adds up everything you’ve earned over a specific period and extrapolates that for the rest of the tax year, so might assume that this is a pay rise rather than a bonus. If HMRC estimates that your income is higher than it is, it might change your tax code and charge you a higher tax rate.

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