Bonus season pushed to April as tax cut kicked in

OFFICIAL statistics released yesterday confirmed that many companies held off on their bonus season until April this year, when the highest rate of income tax was cut to 45 per cent.

Bonus payments for finance and insurance this April reached £1.3bn, more than twice as high as in the same month in 2012, when £600m was paid out.

In April, changes from the 2012 budget kicked in, reducing the top rate of income tax from 50 per cent to 45 per cent, cutting the amount that high earners send to the treasury.

While bonuses between April 2012 and March 2013 were only one per cent higher than in the same period a year earlier, between May 2012 and April 2013 there was a four per cent boost, showing how firms held off to make their payments.

In total, £36.9bn was paid out in bonuses over the last financial year, up £300m on the previous 12 months. The total is still down from 2007-08, when £42bn was extended

Some sectors are have seen performance pay rebound more quickly than others. Finance and insurance bonuses still lag some way behind their pre-crisis peak, down from £19bn in 2007-08 to £13.3bn in 2012-13.

In comparison, bonuses to the rest of the economy have nearly back to their record levels again. At £23.6bn, bonuses to non-financial businesses are only just below their £24bn high five years ago.

In fact, the average bonus per employee in finance and insurance actually fell slightly over the year, from £12,000 to £11,900.

There was considerable debate about the impact of raising the top rate to 50p, with some suggesting that a fall in revenue from self-assessed income tax was evidence that the rate was failing to increase receipts.

Earlier this year, Goldman Sachs decided not to delay its bonus payments until April, after criticism from former Bank of England governor Lord King.