City staff to share £6.8bn bonuses
Published 23/04/2010 | 00:12
The City's bonus pot is forecast to swell to £6.8 billion this year - but researchers suggest the taxman will scoop up more than workers.
According to predictions from the centre for economics and business research (CEBR), the bonus pool will increase this year after a bumper year for many financial firms and increased recruitment in the sector.
The figure is likely to provoke anger as the level of bonuses steadily recovers in the wake of the financial crisis.
But the CEBR said the new 50% tax rate on income over £150,000 will mean the largest slice of the payouts will be taken by the State.
City workers are forecast to take home £3.6 billion after paying income tax and National Insurance.
But the CEBR said the Government could haul in £4 billion as a result of bonuses because firms would also have to pay 12.8% in National Insurance contributions on the discretionary earnings.
Economist Benjamin Williamson said: "The recent change to the tax system has shifted the balance of rewards from City bonuses in favour of the Government.
"Despite contributing billions of pounds in tax already, the public's appetite for a larger slice of City bonuses will not go away."
He said that while the average City worker would still take home more than half of gross salary, those in line for the chunkiest rewards would pay out more than 50% of their incomes in tax.
The CEBR research showed the steep rise in bonus payments in the years leading up to the financial crisis. In 2001, the reward pot was a little under £4 billion, but this had rocketed to £10.2 billion in 2007.