FT readers count on to take pleasure in increased payouts this bonus season, however complain they’re having to work tougher for his or her bonuses as tax will increase chew and efficiency metrics alter.
Greater than 1,000 readers supplied detailed responses to our annual bonus survey, with simply over half saying they anticipated a much bigger or considerably greater payout than final yr.
These working in banking and funding banking had been almost certainly to report “substantial” will increase as UK and US banks scrapped the EU bonus cap, enabling payouts of as much as 25 instances primary wage at some establishments.
Excessive flyers within the authorized occupation and asset administration sector additionally reported massive will increase, however the two worst performing sectors had been vitality and administration consultancy, with the very best numbers of respondents reporting bonuses value “considerably much less” than final yr.
Round one in 10 respondents mentioned the metrics used to measure their efficiency had modified this yr — the bulk in banking. Some complained that “mounted pay inertia” had set in, so whereas their bonus had risen, general compensation packages had been pretty flat.
Readers’ detailed responses additionally expressed uncertainty about pay and efficiency within the yr forward. Will we see a blockbuster yr of M&A as President Trump’s re-election stokes animal spirits and bonus caps are lifted? Or will a worldwide commerce battle and tax adjustments within the UK Funds crush any prospect of a bumper payout subsequent yr?
Most readers who accomplished our survey in 2025 anticipated fatter payouts than final yr, with 15 per cent in line for a bonus of between £250,000 and £2mn, in contrast with 10 per cent in our 2024 ballot.
One in 5 respondents mentioned they anticipated a bonus of between £100,000 and £250,000, up from one in eight final yr. This yr’s pattern dimension was admittedly smaller, however of their detailed responses, many readers mentioned that whereas bonuses had elevated, so had using deferral mechanisms (see beneath).
Removed from feeling richer, a temper of warning prevailed in readers’ detailed feedback as bonus payouts struggled to maintain tempo with elevated residing prices together with VAT on faculty charges and better mortgage charges.
In whole, 14 per cent of readers mentioned they meant to spend most of their bonus — a two proportion level uptick on final yr — and 17 per cent meant to make use of their bonus to pay down debt, assuming they had been nonetheless in line to obtain a payout.
“I want I’d paid off my mortgage earlier as an alternative of shopping for a ship,” regretted one retail govt, who mentioned his bonus had been cancelled this yr after weaker gross sales and better prices ensuing from Funds adjustments to employer’s national insurance.
Almost one in three readers mentioned October’s Funds had influenced how they’d deploy their bonus cash this yr, with January’s will increase to private school fees upsetting essentially the most ire.
One reader in monetary companies mentioned he was setting apart his total £50,000 bonus to deal with the “spiteful imposition” of VAT on faculty charges, predicting this might hit UK financial exercise: “I do know that many different dad and mom are doing the identical as me and spending far, far much less on different objects, so many companies will likely be feeling the pinch.”
“I now have to earn considerably greater than final yr to cowl VAT on faculty charges and mortgage prices, that are all rising,” mentioned one reader within the oil and fuel sector, who expects a considerably diminished bonus this yr.
It wasn’t simply dad and mom who mentioned the Funds had made them extra cautious with their bonus cash. “Spending much less and saving extra” was the second mostly expressed response in our ballot, with causes cited together with fears of redundancy, plus the danger of additional tax rises and the UK financial system weakening additional.
“About 80 per cent of my peer group (male, aged 50+) have been let go lately, so I’m considerably hesitant in spending the bonus I acquired,” mentioned one banker anticipating a payout of greater than £100,000. “I’d fairly save or make investments it to organize for the inevitable.”
Of those that had been desiring to spend the vast majority of their bonus cash, one in 5 mentioned they’d use the money to pay down a bit of their mortgage, and a handful of high-earning youthful respondents mentioned they meant to clear their pupil loans early. It is a far cry from the exuberance generally related to bonus season.
“Final yr, I purchased an aeroplane (mild sport plane) however crashed it after three months. I’ll make investments my bonus this yr,” vowed one asset supervisor anticipating a payout of between £50,000 and £100,000.
Regardless of the gloomy sentiments, this yr has seen a 5 proportion level swing again in favour of investing the vast majority of any bonus — essentially the most tax-efficient use of the money.
Probably the most noticeable bounce was the elevated attractiveness of stocks-and-shares Isas, with 55 per cent of this yr’s respondents saying all or a part of their bonus was destined for the tax-free funding accounts, in contrast with 33 per cent a yr in the past.
“Isas seem essentially the most tax-efficient vessel, with fewest rumours of basic change,” mentioned one banker anticipating a payout of over £100,000.
Readers’ detailed feedback confirmed that many have actively determined to deprioritise pension saving after inheritance tax adjustments had been introduced final yr — the fifth commonest response to the Funds query — even when they’ve but to earn sufficient to be affected by the annual allowance taper, which reduces tax-free pension contributions to only £10,000 a yr for the very best earners.
“I’m deprioritising my pension, as I now absolutely count on the foundations to be modified sooner or later and have misplaced belief within the system,” mentioned one hedge fund supervisor anticipating a bonus of over £100,000.
“Usually I might put a bit of my bonus into my pension, however the tax guidelines hold altering and I’m moderately assured that earlier than I retire they are going to be so detrimental to anybody with a pension pot value having that there’s little level committing to it any extra,” mentioned a dealer anticipating a payout of over £100,000.
Nimesh Shah, chief govt of Blick Rothenberg, an accountancy agency, says he has observed fewer purchasers opting to “pension their entire bonus” this yr, with many additionally searching for to max out Isas for themselves, their associate and their kids. Though Isas don’t have any upfront tax aid, future tax-free withdrawals and larger flexibility over when funds will be taken have boosted their enchantment.
“Underneath-50s in impact get a £21,000 Isa allowance, as they obtain a £1,000 authorities bonus in the event that they make investments £4,000 right into a Lifetime Isa,” he says. It’s important to be below 40 to open a Lifetime Isa, however can hold paying into it for 10 extra years, though the funds usually are not accessible with out penalty till age 60.
Nonetheless, one group of survey respondents felt they’d no alternative however to pay extra of their wage and bonus cash into pensions — these caught by the so-called six-figure wage lure.
Readers generally reported utilizing wage sacrifice schemes to spice up office pension contributions and cut back their taxable pay beneath £100,000 on paper. This manner, they keep away from excessive marginal charges of tax on the slice of earnings between £100,000 and £125,140 as the private allowance is clawed again, and may retain useful childcare advantages together with “free” nursery hours and tax-free childcare that will be misplaced if one mum or dad earned greater than £100,000.
“Paying right into a pension is de facto the one choice for me,” mentioned one reader working in insurance coverage anticipating a bonus of as much as £50,000. “If I didn’t, my bonus could be topic to tax and nationwide insurance coverage at 62 per cent, plus I might lose my daughter’s nursery hours. I might love to make use of this cash to assist pay increased mortgage funds and ever-increasing nursery charges, however the maths doesn’t work.”
A sentiment generally expressed amongst FT readers was to maintain maximising tax allowances earlier than the federal government additional reduces them. Many feared the enlarged pensions annual allowance of £60,000 would be the subsequent for the chop.
“I’m feminine, in my 30s with out kids (however I could have them finally) so I’m attempting to place 30-40 per cent of my whole pre-tax earnings into pensions, together with my bonus,” commented one reader in tech anticipating a £10,000 payout. “If in future I want to chop down on pension contributions resulting from the price of having kids, I can accomplish that simply realizing that I’ve front-loaded a variety of the trouble of saving for retirement, and can have over thirty years for compounding magic to happen.”
This yr’s survey additionally confirmed one in three readers meant to speculate a few of their bonus cash into normal funding accounts (GIAs), in comparison with only one in 5 final yr.
Of their extra detailed feedback, loads of readers famous the attractiveness of buying gilts inside a normal funding account. Whereas earnings is taxable, no capital good points tax applies to funding development, which means bonds buying and selling beneath their face worth can ship tax-free returns for traders who redeem at maturity or promote above the acquisition value.
This yr’s ballot additionally urged readers have a larger urge for food for threat, with an uptick in these planning to make use of enterprise capital trusts (VCTs) and Enterprise Funding Schemes (EIS) to make long-term investments into smaller UK firms, attracted by upfront tax aid of 30 per cent.
Adam Walkom, co-founder of Everlasting Wealth Capital, a monetary planner, says that whereas purchasers had been intrigued by the tax advantages, they had been cautious of the danger that smaller UK corporations might take an outsized hit in an financial slowdown.
“The benefit of a VCT is that it’s a pooled strategy, so that you may personal one VCT fund which has say 30 of those specific sort of firms,” he says. “Nonetheless, if you evaluate the funding costs to straightforward index funds, they appear horrific. VCT funds generally have annual charges someplace between one and two per cent; there’s 1 per cent dealing costs, and you might must pay an exit price of 5 per cent to get out, which needs to be considered.”
Regardless of the shortage of tax benefits, the proportion of readers who deliberate to speculate a few of their bonus cash into cryptocurrencies has practically doubled in a yr, at 6 per cent, as President Trump vows to make the US the “crypto capital of the planet”.
“A bullish yr for crypto, so I’ll make investments my bonus in that together with my Nasdaq and S&P trackers,” mentioned one UK-based recruitment marketing consultant, including that the eventual capital good points hit on crypto had not put him off.
On the different finish of the danger spectrum, many readers confessed they had been in “mortgage pay down mode” this bonus season, as fixed-rate offers expire, and rates of interest look set to stay increased for longer.
“Mortgage discount is the one sport on the town,” mentioned one reader in asset administration whose five-year repair has one yr left to run. They intend to sink their total £100,000 bonus into this (observe that after further price earnings tax and Nationwide Insurance coverage, this will likely be diminished to £53,000).
“I’m utilizing my bonus to pay down the mortgage to cut back the volatility arising from the variability in earnings, which is a continuing concern for most individuals within the monetary business,” commented a dealer who expects to obtain a bonus of over £50,000.
“Metropolis staff could possibly be on a pleasant bundle of £300,000 however if you have a look at their web disposable earnings after tax, mortgage funds and better charges for a few kids at non-public faculty, there’s typically not an terrible lot left,” says Adrian Anderson, managing director of mortgage dealer Anderson Harris.
He mentioned excessive earners on interest-only mortgages had been essentially the most uncovered to “cost shock”. Within the days of rock-bottom charges, many consumers considered interest-only loans as “paying an affordable ‘hire’ secured towards an asset that was going up in worth.” Mortgage charges have shot up because the pandemic, however prime central London property values haven’t, therefore extra purchasers are utilizing bonuses to pay down debt and cut back month-to-month repayments.
An underlying sentiment expressed in readers’ detailed feedback was the need to promote up within the UK and transfer someplace hotter with decrease tax charges — and older readers with giant pensions weren’t the one ones.
“I’m saving my bonus with a view to leaving the UK within the subsequent 5 years,” mentioned one reader working in enterprise capital, who expects a bonus of as much as £50,000. “As an EU citizen from a rustic the place there are good jobs and considerably decrease prices of elevating kids, it makes me extra aggravated at tax adjustments. If the tax atmosphere was completely different I might purchase a much bigger residence right here and be completely satisfied to remain indefinitely.”
The altering form of incentive pay
This yr’s survey reveals that the lifting of the EU-era bonus cap has allowed banks to reward their prime expertise with bumper payouts, writes Jamie John.
The perfect performers at US banks within the UK have acquired uplifts of 40 to 45 per cent, says Matt Nicholson, head of Europe at recruiter Selby Jennings, who says the “greatest shift out there” has been a push by funding banks to compete with buy-side corporations on pay. “Family-name banks are actually trying on the hedge fund world as their competitors,” he mentioned. “The bonuses there are severely good”.
Nonetheless, there are giant disparities between the very prime performers, who can earn huge sums in incentive pay, and people who fall wanting these lofty heights. Many readers advised us they felt short-changed by their employers, expressing frustration that base salaries had stagnated whereas the proportion of deferred bonuses had risen, which means that workers might want to lock in with their present employer for longer to entry the cash step by step.
“I’ve been right here for 15 years and have by no means seen folks so offended, in any respect ranges,” mentioned one banker, who added that each one however the highest income mills had been anticipating solely single-digit bonus rises in proportion phrases — “not precisely inflation crushing”. So-called “materials threat takers” on the agency, nevertheless, might theoretically earn a bonus of as much as 25 instances base pay.
Not all is properly on the buy-side, although. Asset and wealth managers bemoaned a scarcity of transparency in the way in which bonus funds had been calculated, with one complaining his employer had adopted a brand new “efficiency ranking (learn: administration’s whims)”.
Bonuses “have a tendency not to be pushed by one revenue metric”, explains David Ellis, head of strategic reward advisory at accountancy group BDO. Corporations have as an alternative come to rely on a broader vary of efficiency measures reminiscent of buyer satisfaction, which means that whereas whole bonus swimming pools may need elevated in step with income, the rise “has not been shared between contributors on a pro-rata foundation”.
Wanting ahead, Andrew Patterson, associate at Clifford Likelihood, a legislation agency, expects prospects for UK-based bankers will proceed to learn from the lifting of the bonus cap and an additional simplification of guidelines on bankers’ pay anticipated later this yr. The Prudential Regulation Authority has proposed the discount of deferral intervals and permitting bankers to earn dividends on share-based bonuses whereas they’re deferred. Patterson thinks the adjustments will collectively put “UK on a extra even footing with key world monetary centres exterior the EU” serving to to “appeal to and retain prime expertise”.
All illustrations by Jamie Portch
