Giving my bonus to those better able to spend it

I believe that I work hard.  In fact I'm now at the point (and have been for a few months) where I'm wondering if I can increase my discretionary energy further or whether doing so will result in burn-out.  I'm therefore for now maintaining status quo while I better understand my long term capability.  Fortunately, that hard work typically transfers into results meaning another year has passed where my personal work objectives have been yet again knocked out of the park.  Great I hear you say, another year of big bonuses, which you’ll save all of, which will pull you even closer to FIRE.  I wish it were true...

Firstly, bonuses at my company are structured in such a way that it considers your objectives as well as the objectives of the company as a whole.  I can sort of understand this as it protects the company in very bad times such as those seen at the bottom of the Global Financial Crisis.  So has company performance been good this year?  Unfortunately the answer to that question is a resounding no.  If I was asked was the company doing well I would of course give a very different answer but hey ho.  The end result of all this is that a large portion of my bonus will not pay out.  Of course the portion not paid out goes straight to the bottom line meaning a large portion of my hard work this year has gone to enriching the owners of the company.

Secondly, at about the same time as I was calculating what bonus I could expect a present (it is the festive season after all) from HM Revenue and Customs dropped through the door.  My high earnings combined with a large increase in my rate of dividends (I did dare to defer consumption and invest the savings after all) meant that HMRC wants many thousands of pounds more than was originally extracted through PAYE.  So a large portion of my hard work will also go to the taxman.

Click to enlarge, RIT year on year dividend change

Now this post is sort of a rant so I will question whether the tax I pay is proportionate and fair given:

• A portion of those very taxes are used against me to ensure things like houses remain expensive for my family and I;
• I live well on less than a third of what I pay in tax which to me just points to government waste and prolificacy;
• My hard work is taxed at effective rates of up to 62%; meanwhile
• Those who sit a few desks away from me can incorporate, ‘go contracting’ and pay vastly reduced tax sums because they are in a different line of work;
• The company at which I work will pay tax at nothing like what I do in % terms.

Anyway, enough of that.  At the end of the day moaning is not going to change the fact that the majority of my bonus this year will be used to enrich the owners of my company and those the government decide are more deserving than my good self.

So what am I going to do about it I hear you ask?  I can’t change the company bonus rules and I can’t change the fact that UK PLC have always and will always tax hard work so I’m going to do nothing about that.  What I am going to do is continue to work hard (even if I don’t work harder), continue to look for savings while living well below my means and continue to invest the difference wisely (including pension salary sacrifice while it’s still sensible to do so and maximising ISA contributions).

Even though I’ve taken some knocks this approach has worked well so far so I see no reason why it won’t continue to work next year.  Who knows with a fair Mr Market wind it might even see my Financially Independent towards the back end of 2016.  My post at this point next year could then be very different indeed...