It's not everyone that gets access to a bonus, and as the name suggests, a bonus may not always be guaranteed and can often come as a lovely surprise.

As a result, many people may use a bonus as a treat or to fund something like a holiday or home improvement.

But bonuses are a single lump sum in addition to pay, and as with any additional 'pay', there is a decision to be made between spend and save, so this should also apply to lump sum bonuses. They provide a real opportunity to add to or kick-start short, medium and long-term savings. And to ensure we make the most of them, we also need to understand any tax implications so they don't land us with an unexpected tax bill.

Many organisations are likely to allow some bonus to be 'sacrificed' and paid into your pension.  And it's not just the amount you pay in that gets added to pension; you also get added tax relief, within allowable limits, so using your bonus could provide a really valuable way to boost your pension savings.

But bonuses are pay and so will be subject to income tax. For some people, bonuses may take you into a higher rate income tax band, so it's worth knowing this, understanding the implications and whether there are any opportunities to plan to reduce that tax impact. 

For those who are already higher earners, a bonus may also impact the amount you can contribute to your pension within your annual tax relief limits, so this will need careful planning.

Bonuses are a great thing, but it takes a bit of knowledge, planning and application to ensure you make the most of them.