The numbers have been crunched and there's good news and less good news.
The good news is you're getting a bonus. The less good news is you don't get to keep it.
The highest paid bankers and traders in the UK and Europe who receive a bonus of £1m this year could end up receiving no money at all after tax in 2011 – and may face a tax bill that is bigger than the upfront cash part of their bonus – under current European proposals to reform remuneration. Calculations by Financial News based on the latest bonus proposals by the Committee of European Banking Supervisors show that anyone in the UK – or working for a UK bank anywhere in the world – who receives a £1m bonus would receive a maximum of £200,000 in cash upfront.
Of this, £100,000 would be payable in income tax and, depending on the nature and structure of the award, another £100,000 could be payable in tax immediately. Including national insurance, or higher marginal tax rates in some European countries, the upfront tax liability could be more than the upfront bonus.