Companies to pay early bonuses to avoid 50 per cent tax

Some of Britain's biggest companies are preparing to pay 2009 bonuses early, allowing employees to avoid the 50 per cent top tax rate of income tax, which comes into force on 6 April.

Highly paid managers at groups including Tesco, SABMiller and Land Securities can expect to receive their bonuses earlier than usual this year, and to be taxed at 40 per cent, rather than the new higher rate, which was announced for salaries of more than £150,000 during last year's budgetary changes. Bonuses are usually paid in April or May.

Groups such as Marks & Spencer, Whitbread and J Sainsbury are working around the clock to get their annual reports signed off so that bonuses can be paid. While the tax increase affects only those earning in excess of £150,000, thousands of people earning below the new threshold are also expected to receive an early windfall.

At Tesco, as many as 1,700 staff are expected to be paid. The supermarket giant's chief executive Sir Terry Leahy will make a considerable saving on the £1.2m cash bonus he has been awarded for 2009. Although Dairy Crest employs only a handful of people that earn more than the £150,000 threshold, the company is bringing forward bonus payouts for about 550 staff. The London Stock Exchange has given its employees the option of being paid before or after the deadline next month, so they can judge the effect of the payments on their own tax arrangements.

Despite missing the extra revenue, the Government will welcome the extra spending by those with early bonuses.