How bonuses are taxed

Are bonuses taxed differently?

No — there's no special “bonus tax rate”. A bonus is simply extra earnings, taxed at your marginal rate like the rest of your pay. What makes a bonus feel heavily taxed is that it stacks on top of your salary, so more of it can fall in a higher band — and it can quietly trigger a few other charges along the way.

Income Tax on a bonus

Your bonus is added to your other income and taxed at whatever rate that income reaches. In the rest of the UK that's 20%, 40% or 45%; Scotland has its own bands. If your salary already uses up your tax-free allowance, the whole bonus is taxed — often at 40% if you're a higher-rate earner.

National Insurance on a bonus

You also pay National Insurance on a bonus — but unlike Income Tax, NI is normally calculated separately for each pay period. For a monthly-paid employee in 2026/27 the 8% rate applies between £1,048 and £4,189 in that month, with 2% above. Because a bonus paid in one month pushes that month's pay well over the upper limit, most of the bonus is charged at just 2% NI. That makes the NI on a one-off bonus much lower than an annual-thresholds estimate suggests.

Why a bonus can push you into another band

Because the bonus sits on top of your salary, it can straddle a threshold. Say you earn £45,000 and get a £10,000 bonus: the first £5,270 stays in the 20% band, and the remaining £4,730 is taxed at 40%. Only the part above the threshold is taxed at the higher rate — not the whole bonus. The bonus tax calculator shows the split.

Student loan deductions

If you're repaying a student loan, a bonus that takes your pay above your plan's monthly threshold loses 9% (or 6% for a postgraduate loan) on the amount over it. Because the threshold is applied per pay period, a one-off bonus can produce a larger-than-usual deduction in that month.

Child Benefit and the £60k threshold

If you or your partner claim Child Benefit, a bonus that lifts your adjusted net income above £60,000 starts the High Income Child Benefit Charge — 1% of the Child Benefit clawed back for every £200 of income, with the whole amount gone by £80,000. The charge is collected through your tax code or Self Assessment, separately from the bonus payslip.

The £100k Personal Allowance trap

Between £100,000 and £125,140, every £2 of income withdraws £1 of your Personal Allowance. That withdrawn allowance is then taxed, so each extra pound in this band carries an effective 60% Income Tax rate. A bonus that pushes you into this zone is taxed far more heavily than the headline 40% suggests — which is exactly where sacrificing it into a pension pays off most.

Sacrificing a bonus into a pension

If your employer offers it, you can sacrifice the bonus: the full gross amount goes into your pension and you pay no Income Tax or National Insurance on it. The clever part is the cost: because you only give up the cash you'd have kept after tax, a £10,000 bonus can land £10,000 in your pension for a take-home cost of perhaps £6,000–£7,000.

Sacrificing also keeps your adjusted net income down, so it can protect your Personal Allowancein the £100k band and reduce the Child Benefit charge. The arrangement must be agreed before you become unconditionally entitled to receive the bonus as cash — you can't sacrifice money you're already entitled to.

Why the payslip can differ from the annual calculation

PAYE is operated per pay period, not once a year, and the three deductions behave differently:

• Income Tax is cumulative. If a bonus month over-deducts, your tax code usually corrects it over the following pay periods, so the annual figure is what you end up paying.
• National Insurance and student loan are worked out separately for each pay period and do not reconcile in the same way. A big bonus can take a large student-loan slice in that month; if your annual income ends up below the threshold you can reclaim it, but it isn't automatic.

That's why this calculator shows Income Tax as the annual effect but estimates NI and student loan for the single pay period the bonus lands in — closer to what actually reaches your account.