You may get your bonus early

Sadly, the vast majority of investment bankers are sceptical of the suggestion that this year's bonuses will be paid early in a bid to avoid the new 50% high earners income tax rate due to be implemented in April. But, although banks may not have announced such a move yet, tax experts believe you'd be wrong to discount the possibilty entirely.

The 50% top rate of income tax is, of course, a turn-off to high-earners in the UK, and coupled with the FSA's hardline on bonuses, Blighty looks like a very unattractive place indeed for bankers.

But, in spite of suggestions that HM Revenue & Customs will crackdown on any loopholes that would allow bankers to avoid paying the 50% income-tax rate, there are still ways of potentially side-stepping it.

"Many employers will consider either accelerating paying bonuses prior to April 2010 to ensure a 40% income-tax rate, or defer the point of receipt for a number of years in anticipation of the top rate of income tax decreasing again at some point in the future" says Clive Fathers, tax partner and head of Employer Solutions at Grant Thornton.

Deferring bonuses over a number of years, and hence tying them to the long-term risk profile of the institution, is of course central to the FSA's remuneration report. But surely, the government wouldn't allow bonuses to be paid early?

"You would expect the Treasury not to worry too much about firms accelerating pay prior to the income tax increase," says Chris Sanger, head of tax policy at Ernst & Young. "It means the government coffers are filled at a time when they're relatively empty - admittedly at the 40% rate, but it would generate a greater tax intake for this year."

Still, our own research suggests that investment bankers are not optimistic of receiving an early bonus. Nearly 90% of respondents to an eFinancialCareers poll asking if 2009 bonuses will be paid early to avoid the 50% tax rate voted 'no'.

Other bonus reforms also might not be entirely negative. There's the possibility that 40-60% of bonuses will have to be paid in shares (or 100% if the Conservatives get their way). Again, there's a potential upside to this.

"Part of the share options would initially be taxed under income tax," says Sanger. "But any appreciation would eventually come under capital gains tax, which at 18% offers a large differential to the 50% income-tax rate."