Lewis Hamilton all set for £27m deal with Mercedes

World champion Lewis Hamilton is poised to sign a new contract with Mercedes this week that will earn the Formula One driver an estimated £27m a year.

"It should be done this week," said Hamilton in an interview with BBC Sport. "Honestly, it's 99.6 per cent done. There's no negotiating left, it's just legal stuff."

Negotiations between Mercedes and the British champion have been ongoing for months, but they were shelved before last year's Russian Grand Prix to allow the 30-year-old to focus on his title duel with Nico Rosberg. Once Hamilton had seen off his rival's challenge to win his second world title, the discussions were resumed during pre-season testing.

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Despite recent rumours suggesting Hamilton could be "considering a bombshell switch to Ferrari", it appears certain that he will continue with Mercedes, the manufacturer he joined in 2013 after six years with McLaren.

According to the BBC, the world champion will earn roughly what he did under his first contract with Mercedes, "a basic salary, paid in US dollars, of $31m (£20.9m) plus extensive bonuses".

If he is successful over the coming seasons, his bonuses from race wins and championship titles could bump up his annual earnings to more than $40m (£27m).

That would put Hamilton on a par with McLaren's Fernando Alonso, who is being paid $40m by McLaren and Honda in a three-year deal he signed last year. Vettel, who won Sunday's Malaysian Grand Prix, is earning $50m (£33.7m) in his first season with Ferrari but F1 sources say that figure will be reduced in the seasons to come to $30m (£20.4m). The BBC says this season's payment is exorbitant because it was agreed between Vettel and Ferrari that "he would have all possible bonuses he could earn guaranteed, as a kind of golden handshake for joining the team".

Meanwhile Hamilton appears undaunted by Vettel's victory in Malaysia, and believes Ferrari's win – their first since 2013 –wasn't a flash in the pan but a sign that they are once more title contenders. "I don't think it's a one-off," he said. "I don't think they were lucky or it was a fluke." But far from being daunted by Vettel's win, the Briton believes it will add interest to this season's championship. "It's nice to see Ferrari back," he said. "This result has given us a pinch. We know now we've got a race on our hands."