A mobile-friendly UK compensation model for working out how much of a bonus should stay as taxable cash and how much should be routed as an employer pension contribution. The point is to avoid unnecessary threshold cliffs in tax and student loan deductions while still keeping enough cash now.
Not financial advice. Do your own research. Errors and omissions excepted. Treat this as an indicative planning tool and double-check the figures against your payslip, pension scheme rules, HMRC guidance and, where needed, a qualified adviser as best practice.
Salary, pension method and loan plan define which thresholds the cash part of the bonus can trip.
Cash bonus attracts tax, employee NI and possibly student loan. Employer pension routing does not.
Routing about 21.8% of the bonus to pension keeps non-pension income at or below £100,000 and helps avoid the personal allowance taper point.
Working-parent free childcare support can be lost if expected adjusted net income goes above £100,000 for the current tax year.
Taking the bonus fully as cash would push adjusted net income above £100,000, which can mean losing working-parent free childcare support.
High Income Child Benefit Charge starts above £60,000, reaches full clawback at £80,000, and tapers at 1% of Child Benefit for every £200 over the threshold.
Adjusted net income is already at or above the HICBC full-clawback point.
Paying the whole bonus as cash would push non-pension income from £93,100 to £101,920, which crosses the personal allowance taper point. Routing about 21.8% of the bonus as an employer pension contribution keeps non-pension income at or below £100,000 while still leaving take-home around £60,771.
This isolates the slice of the bonus you still take as taxable cash instead of sending all of it as an employer pension contribution.