Bonus Tax Calculator UK 2026
Calculate how much of your bonus you'll take home after tax and National Insurance
Your Bonus After Tax
Net Bonus Payment
Annual Income Breakdown (Salary + Bonus)
What is Bonus Tax?
Getting a bonus is great news. Figuring out how much of it you actually keep is a different story. HMRC treats your bonus as employment income, which means it is taxed through PAYE alongside your regular salary. Depending on where your total earnings land for the tax year, your bonus could be taxed at 20%, 40%, or even 45%, and that is before National Insurance is taken off.
Our Bonus Tax Calculator UK does the heavy lifting for you. Enter your annual salary, bonus amount, and a few quick details, and you will see exactly how much tax and National Insurance will be deducted, and what lands in your bank account.
Bonus tax is not a separate tax. There is no special rate HMRC applies just because you received a bonus payment. A bonus is simply added on top of your regular salary, and the combined total is what determines how much Income Tax you owe.
So if you earn £30,000 a year and receive a £5,000 bonus, HMRC treats your total income as £35,000 for the purposes of working out your tax. If that bonus pushes any portion of your income into a higher tax band, that portion gets taxed at the higher rate.
This is why bonuses can feel like they attract a punishing level of tax. They often do not change your overall tax rate across your full income, but because they are paid in a single lump sum, your employer’s payroll system can temporarily apply a higher deduction in that particular pay period. In some cases, emergency tax codes are applied, which leads to overpayment. That money is refunded, but it takes time, and understandably causes confusion in the meantime.
The key thing to understand is this: your bonus is subject to the same Income Tax rates and National Insurance rules as your salary. What changes is the total income figure those rules are applied to, and whether that total crosses into a higher band.
For the 2026 tax year, the Income Tax bands in England, Wales, and Northern Ireland are:
- Personal Allowance: Up to £12,570 – 0% tax
- Basic Rate: £12,571 to £50,270 – 20% tax
- Higher Rate: £50,271 to £125,140 – 40% tax
- Additional Rate: Above £125,140 – 45% tax
Scotland has its own separate bands, which differ slightly from the rest of the UK.
It is also worth noting that if your total income (including your bonus) exceeds £100,000, your Personal Allowance starts to reduce by £1 for every £2 you earn over that threshold. Once you hit £125,140, the Personal Allowance disappears completely, which effectively creates a 60% marginal tax rate on income between £100,000 and £125,140. This is one of the most overlooked tax traps for people who receive larger bonuses.
How Bonuses Are Taxed in the UK
HMRC does not have a separate box on your payslip labelled “bonus tax.” Your employer deducts tax on your bonus through the standard PAYE system, in the same way they deduct tax on your monthly salary. The method used to calculate the deduction, however, is what causes most of the confusion.
The Annualisation Method
When your employer processes your bonus through payroll, they typically use an annualisation method. This means they take your bonus amount, add it to your regular monthly salary, and then multiply that combined figure by 12 to work out what your annual earnings would be at that rate. They then calculate the annual tax due on that projected income and divide it by 12 to arrive at the monthly PAYE deduction.
If your bonus is large, this process can temporarily push your projected annual income into a higher tax band, causing a bigger deduction for that month than you might expect. In many cases, the deduction balances out over the rest of the tax year, but if the bonus is paid late in the tax year, there is less time for the payroll system to self-correct.
How Much UK Tax Will You Pay on Your Bonus?
The exact amount of tax taken from your bonus depends on three things: your annual salary before the bonus, the size of the bonus itself, and which tax band your total income falls into.
Here are some straightforward examples using 2025/26 rates:
- If your salary is £25,000 and you receive a £3,000 bonus, your total income is £28,000, still within the basic rate band. Your bonus will be taxed at 20%, so £600 goes to HMRC in Income Tax (before National Insurance).
- If your salary is £45,000 and you receive a £10,000 bonus, your total income becomes £55,000. The first £5,270 of your bonus keeps you within the basic rate band and is taxed at 20%. The remaining £4,730 crosses into the higher rate band and is taxed at 40%. So the tax on your bonus is not a flat rate, it is split across two bands.
- If your salary is £120,000 and you receive a £15,000 bonus, your total income reaches £135,000. At this level, you have no Personal Allowance left, and everything is taxed at either 40% or 45%. The portion between £125,140 and £135,000 is taxed at 45%.
Will your bonus be taxed at 40%?
Not necessarily, and not all of it, even if part of it does fall into the higher rate band. Only the portion of your bonus that sits above the £50,270 threshold is taxed at 40%. Everything below that threshold is taxed at 20% (or 0% if it falls within your remaining Personal Allowance). This is why using a bonus tax calculator before you receive your payment is so useful, it gives you a clear, band-by-band breakdown rather than a single confusing headline figure.
Emergency Tax on Bonuses
In some cases, particularly where a bonus is processed separately from a regular payroll run, your employer may apply an emergency tax code (such as BR or 0T). This means your entire bonus is taxed without the benefit of your Personal Allowance or standard tax code.
If this happens, you will almost certainly have overpaid, and HMRC will refund the difference, but it is worth checking your payslip carefully to see which tax code was applied.
National Insurance on Bonuses
National Insurance (NI) is another deduction that comes off your bonus before it reaches your bank account, and it follows slightly different rules to Income Tax.
As an employee, you pay Class 1 National Insurance Contributions. For 2026, the rates are:
- 8% on weekly earnings between £242 and £967 (equivalent to £12,570 to £50,270 annually)
- 2% on weekly earnings above £967 (equivalent to above £50,270 annually)
One important detail: National Insurance is calculated per pay period, not annually. This is different from Income Tax, which is assessed across the whole tax year. For bonuses, this distinction matters quite a bit.
If you receive a large bonus in a single month, your earnings in that pay period are treated as if that is your ongoing weekly or monthly wage. This means a bigger chunk of your bonus may fall into the 8% NI band, even if your regular monthly earnings sit much lower.
Unlike Income Tax, there is no annual reconciliation for National Insurance contributions. What is deducted in that pay period is what you pay, and there is generally no mechanism for HMRC to refund overpaid NI the same way overpaid Income Tax is refunded.
How much National Insurance will be taken off your bonus?
The calculation depends on your earnings in that specific pay period. For most employees receiving a bonus in a month where their total pay (salary plus bonus) stays below the upper earnings limit of £50,270 per year (approximately £4,189 per month), the NI rate on the bonus portion will be 8%. Once your monthly pay crosses that threshold, the rate drops to 2% on anything above it.
Your employer also pays Employer’s National Insurance on your bonus, currently 13.8% on earnings above £9,100 per year. This comes out of your employer’s budget, not your pay packet, so it does not directly reduce what you take home. However, it is relevant if you are considering salary sacrifice arrangements, as it creates a shared incentive for both you and your employer to use those schemes.
Can I Reduce Tax on My Bonus by Increasing Pension Contributions?
Yes, and this is one of the most effective and straightforward tax planning moves available to UK employees. Pension contributions made through your employer’s payroll reduce your taxable income before PAYE is calculated, which means a larger pension contribution can keep your total income below a higher tax threshold.
Here is how it works in practice. If your salary is £48,000 and you receive a £5,000 bonus, your total income becomes £53,000, which means £2,730 of that falls into the 40% higher rate band. Instead of paying 40% tax on that £2,730 (a tax bill of £1,092 on that portion alone), you could direct some or all of your bonus into your pension.
If you contribute £5,000 of your bonus into your pension, your taxable income remains at £48,000, you pay basic rate tax on everything above your Personal Allowance, and the full £5,000 goes into your retirement pot.
The pension annual allowance for 2026 is £60,000 (or 100% of your earnings, whichever is lower). Most people have significant headroom within this limit, especially if they have not maximised their contributions in previous years, unused allowance from the past three tax years can sometimes be carried forward.
Salary Sacrifice vs. Personal Pension Contributions
There are two main routes for using pension contributions to reduce bonus tax:
The first is salary sacrifice, where you agree with your employer to give up part of your gross pay (including your bonus) in exchange for a higher employer pension contribution.
This is the more tax-efficient method because it also reduces your National Insurance liability, you pay NI only on the income you actually receive, not the amount sacrificed. Your employer saves on their NI bill too, and some employers pass part of that saving on to you as an enhanced pension contribution.
The second is making a personal pension contribution directly to your pension provider. The government adds basic rate tax relief of 20% at source, so a £4,000 contribution becomes £5,000 in your pension.
If you are a higher rate taxpayer, you claim the additional 20% through your Self Assessment tax return. This route does not reduce your NI liability in the same way as salary sacrifice.
The £100,000 Threshold
If your bonus pushes your income above £100,000, pension contributions become particularly valuable. Every £2 you earn above £100,000 costs you £1 of your Personal Allowance. Directing enough of your bonus into a pension to bring your adjusted net income back below £100,000 restores your full allowance and avoids the effective 60% marginal tax rate that applies in the £100,000–£125,140 band.
This is a legal and commonly used tax planning strategy. If your income is close to £100,000 and you are expecting a bonus, speaking to an accountant before the payment date is strongly recommended.
When Will I Receive My Bonus Tax Refund if Too Much Was Deducted?
If your employer deducted too much tax from your bonus, whether because an emergency tax code was applied, the annualisation method overcalculated your liability, or a simple payroll error was made, you are entitled to a refund. How and when you receive it depends on the circumstances.
Through Your Regular Payslip
In most cases, the PAYE system self-corrects automatically. Your employer’s payroll software communicates with HMRC in real time through Real Time Information (RTI) submissions.
When your next regular salary payment is processed, the system recalculates your year-to-date tax position and adjusts the deduction accordingly. If you overpaid last month, next month’s tax deduction will be lower to compensate. For most employees, this is the quickest route to a refund, it happens without you needing to do anything.
Direct Refund from HMRC – In-Year
If you do not expect a further payslip (for example, if you have left your job after receiving the bonus), or if the overcalculation is significant and your payroll department is unable to correct it through normal payroll, you can contact HMRC directly to request an in-year refund. You will typically need to provide your P45 or details of the tax deducted, and HMRC will assess your year-to-date position and issue a refund by bank transfer or cheque.
After the Tax Year Ends – P800 Notice
At the end of each tax year, HMRC issues a P800 tax calculation to anyone who has overpaid or underpaid tax. If you overpaid due to your bonus being taxed at too high a rate, your P800 will confirm the refund amount and instruct you on how to claim it, usually through your Personal Tax Account online, which is the fastest method. Refunds through this route typically arrive within 5 working days if processed online, or up to 6 weeks if HMRC sends a cheque.
Self Assessment
If you complete a Self Assessment tax return (which is required if your total income exceeds £100,000, or for other reasons), any overpaid tax on your bonus will be captured in your return and either refunded or offset against any other tax owed for that year.
The most important step is to check your payslip when you receive your bonus. If the tax code shown is not your standard code (usually 1257L for most UK employees), there is a good chance you have been overtaxed, and it is worth flagging this with your employer’s payroll team or contacting HMRC directly.
Can My Employer Spread My Bonus Across Multiple Months to Reduce Tax?
This is a commonly asked question, and the answer is, it depends on what you are trying to reduce.
The Effect on National Insurance
Spreading a bonus across multiple pay periods can genuinely reduce the National Insurance you pay, because NI is calculated per pay period rather than annually. If your employer pays you a £12,000 bonus in a single month, your earnings that month could be substantially higher than the monthly upper earnings limit of approximately £4,189.
Everything above that limit is charged NI at only 2%, but everything up to it is charged at 8%. By contrast, if that £12,000 bonus were split across 12 months (£1,000 per month), the additional £1,000 each month would remain within the 8% band alongside your salary, and depending on your regular pay level, this could actually result in more NI being paid over the year, not less.
The NI impact of spreading really depends on your regular salary. For someone earning close to or above the upper earnings limit already, receiving the bonus in one go means most of it is charged at the lower 2% rate.
For someone earning well below the upper earnings limit, spreading could prevent a large one-off month from pushing a significant amount into the 2% band, though the overall annual difference is usually modest.
The Effect on Income Tax
Spreading a bonus across multiple months does not reduce the total amount of Income Tax you pay. Income Tax is assessed annually, and PAYE reconciles throughout the year. Whether your employer pays your £12,000 bonus in January or splits it equally from April to March, your total taxable income for the year is the same, and so is your total Income Tax bill.
What spreading can do is prevent an emergency tax code being applied or reduce the chance of a very large one-off deduction that takes months to correct through PAYE. It makes your payslips more predictable and avoids temporary cash flow issues caused by overcalculated tax. But it will not make HMRC’s bill any smaller in terms of annual Income Tax.
Employer’s Discretion
Whether your employer is willing or able to spread your bonus depends on their payroll practices and the terms of your employment contract. Some employers do offer this flexibility, particularly for larger discretionary bonuses. If you are expecting a significant bonus and are concerned about the tax impact, it is worth having a conversation with your payroll department or HR team before the payment date, not after.
How Are Commission Payments Different from Bonuses for Tax Purposes?
For HMRC’s purposes, commission and bonuses are both treated as employment income. They go through PAYE, they are subject to Income Tax at your marginal rate, and they attract National Insurance contributions. In that fundamental sense, there is no difference in how they are taxed.
However, there are some practical differences worth understanding.
Regularity and Predictability
Commission payments are typically paid regularly, often monthly as part of a sales or performance-based pay structure. Because they are paid in each pay period rather than as a one-off lump sum, the PAYE calculation tends to be smoother. Your payroll system processes commission alongside your salary each month and adjusts your cumulative tax deduction accordingly. This reduces the risk of emergency tax codes being triggered and makes overpayment less likely.
Bonuses, particularly annual or discretionary bonuses, are often paid as a single large payment at a point in the year. The lump sum nature of this payment is what can cause the annualisation issues and overcalculations described earlier in this page.
Tax Code Application
For regular commission earners, HMRC may issue an adjusted tax code that reflects expected commission levels, particularly if your commission income is consistent from year to year and you complete a Self Assessment return. This can spread the tax burden more evenly. For one-off bonuses, there is typically no adjustment to your tax code in advance; the deduction is calculated at the point of payment.
Variable Amounts
Commission payments can vary significantly month to month. If one month’s commission is unusually high, the same annualisation issue that affects bonuses can occur, a temporary overcalculation that corrects itself over subsequent months. For most regular commission earners, this is less of a problem because the payroll system has more pay periods in which to make adjustments.
Self-Employed Commission
If you receive commission as a self-employed person rather than as an employee, the position is entirely different. Self-employed commission income is reported on a Self Assessment tax return, not through PAYE. You pay Income Tax and Class 4 National Insurance based on your net profit for the tax year, and payments are made in January and July each year rather than monthly. This page focuses on employed individuals, if you are self-employed, your tax position will need to be assessed separately.
FAQs: Bonus Tax Calculator UK
How much UK tax will I pay on my bonus?
The tax you pay on your bonus depends on your total income for the tax year, your salary plus your bonus combined. You pay 20% Income Tax on any portion of your bonus that falls within the basic rate band (up to £50,270 total income), 40% on anything between £50,270 and £125,140, and 45% on anything above £125,140. National Insurance is also deducted on top. Use our Bonus Tax Calculator UK to get a precise figure based on your actual salary and bonus amount.
Will my bonus be taxed at 40%?
Only if your total annual income (salary plus bonus) exceeds £50,270, and even then, only the portion above that threshold is taxed at 40%. Everything below £50,270 (after your Personal Allowance) is taxed at 20%. So if your salary is £42,000 and your bonus is £12,000, only the £3,730 that takes you above £50,270 will be taxed at 40%. The rest of your bonus is taxed at 20%.
How much tax will be taken off my bonus?
The deduction from your bonus includes Income Tax at your marginal rate and National Insurance at 8% (or 2% on earnings above £50,270). For a basic rate taxpayer, a rough rule of thumb is that around 28% of a bonus goes in deductions, 20% Income Tax and 8% NI. For a higher rate taxpayer, that rises to around 42–48% depending on the NI position. Our calculator gives you the exact breakdown for your specific situation.
What is the easiest way to calculate my bonus tax?
The easiest way is to use our Bonus Tax Calculator UK at the top of this page. Enter your annual salary, the bonus amount, your tax code, and any pension contributions, and the calculator will show you how much Income Tax and National Insurance will be deducted, and exactly what you will take home. You can also use the manual method: add your bonus to your annual salary, work out the total tax due on the combined figure using HMRC’s tax bands, subtract the tax already paid on your salary, and the difference is the tax attributable to your bonus.
Do I pay National Insurance on my bonus?
Yes. Bonuses are subject to Class 1 Employee National Insurance Contributions in the same way as your regular salary. For 2025/26, you pay 8% on earnings within the National Insurance threshold bands, and 2% on earnings above the upper earnings limit of £50,270 per year. Because NI is calculated per pay period (not annually), a large one-off bonus can lead to a disproportionately high NI deduction in that particular month.
Why was so much tax taken from my bonus?
There are a few possible reasons. Your employer’s payroll system may have used an annualisation method, projecting your bonus as if it were recurring every month, which can push your estimated annual income into a higher tax band. Alternatively, an emergency tax code may have been applied, meaning your bonus was taxed without the benefit of your Personal Allowance. Check your payslip for the tax code used. If it is anything other than your normal code (usually 1257L), you may be entitled to a refund.
How do I claim back overpaid tax on my bonus?
In most cases, PAYE self-corrects automatically through your next payslip. If not, you can contact HMRC directly through your Personal Tax Account at gov.uk to request an in-year refund. If the tax year has already ended, HMRC will issue a P800 tax calculation if you have overpaid, and you can claim your refund online, usually received within 5 working days.
Does a bonus affect my Personal Allowance?
It can do, if your total income (salary plus bonus) exceeds £100,000. Above that threshold, your Personal Allowance reduces by £1 for every £2 of income over £100,000. At £125,140 or above, your Personal Allowance is entirely lost. This effectively creates a marginal tax rate of 60% on income between £100,000 and £125,140, making pension contributions in this range particularly valuable.
Can I put my entire bonus into my pension to avoid tax?
You can contribute all or part of your bonus into your pension to reduce your taxable income, subject to the annual allowance of £60,000 (or 100% of your earnings, whichever is lower) and any lifetime allowance considerations. If done through salary sacrifice before the payment is processed, you also reduce your National Insurance liability. Speak to your employer’s HR or payroll team before the payment date, as salary sacrifice arrangements need to be set up in advance.
Is a bonus taxed differently from salary?
No, a bonus is taxed in exactly the same way as salary. It is employment income, processed through PAYE, and subject to the same Income Tax bands and National Insurance rates. The reason bonuses feel more heavily taxed is largely because they are paid in a lump sum, which can temporarily push your monthly earnings into a higher bracket during the pay period in question, or trigger emergency tax codes.
How does a bonus affect my tax code?
A one-off bonus does not change your tax code. However, if you receive regular bonuses and HMRC becomes aware of this through your tax return or RTI data submitted by your employer, they may adjust your tax code in future years to collect tax more evenly across the year. If your code changes unexpectedly, always check your Personal Tax Account or contact HMRC to confirm the reason.
Do I need to declare my bonus on a Self Assessment tax return?
If your bonus is paid through PAYE and you are not otherwise required to complete a Self Assessment return, then no — HMRC receives the information directly from your employer. However, if your total income (including the bonus) exceeds £100,000, you are required to complete a Self Assessment return. This is also your opportunity to claim back any higher rate tax relief on pension contributions and ensure your total tax position is accurate.
Is a signing-on bonus taxed differently?
No. A signing-on bonus paid by an employer is treated as employment income and taxed through PAYE in the same way as any other bonus. It makes no difference whether the bonus is paid on your first day, after a qualifying period, or as part of a package to attract you to the role. The same Income Tax and National Insurance rules apply.
How does my bonus affect my student loan repayments?
If you have a student loan, your bonus is included in the earnings figure used to calculate your repayment. The deduction is made in the pay period when the bonus is received, at the standard repayment rate for your plan (9% on income above the threshold for Plans 1, 2, and 4; the same rate applies for Plan 5). For 2026, the repayment thresholds are: Plan 1: £24,990; Plan 2: £27,295; Plan 3: £31,395; Plan 4: £25,000. Our calculator includes a student loan deduction option so you can see the full picture.
Can I ask my employer to pay my bonus into my pension instead of my salary?
Yes, in many cases. This is a salary sacrifice arrangement, and it needs to be agreed with your employer before the bonus is processed. If your employer’s pension scheme supports salary sacrifice, you can redirect some or all of your bonus directly into your pension. This reduces your taxable income and your National Insurance liability in one step, making it one of the most tax-efficient options available. Not all employers offer this flexibility, so check with your HR or payroll team as early as possible, ideally before your bonus payment date is confirmed.