Bonus Tax Calculator

Bonuses are taxed as part of your total earnings in the pay period they are received. Your employer adds the bonus to your regular pay and applies PAYE using the standard tax tables. This often pushes you into a higher marginal tax bracket for that period, making it appear heavily taxed, though the annual effect may be lower. Nothing about the bonus is taxed at a special rate; the deductions are the ordinary ones applied to a larger monthly figure.

The deductions on a bonus include income tax at your marginal rate, employee National Insurance and any workplace pension contributions. If the bonus tips your income above £50,270, the portion above that threshold is taxed at 40%. NI works differently: for employees it is worked out on each pay period on its own, at 8% on monthly pay between £1,048 and £4,189 and 2% above that in 2026/27. Much of a bonus paid in one month lands above £4,189, so it attracts 2% rather than 8%. On a £42,000 salary, a £5,000 bonus paid monthly loses £1,000 in income tax and £141.34 in NI, leaving £3,858.66 before any pension or student loan deduction. Company directors pay NI on an annual earnings period, so the same bonus costs them £400 in NI.

This calculator adds your bonus to your annual salary to work out the income tax, and works out NI on your pay for the month or week the bonus is paid in, with a switch for company directors. It shows the tax and NI on the bonus, the effective rate, the net bonus and your take-home pay in a normal pay period against the bonus period. Over the full year, HMRC's cumulative PAYE system brings the total tax back to the right figure, so a heavy bonus month is followed by lighter ones. Employee NI is not cumulative, so there is no NI to come back in later months.

The cumulative system explains the shock. A bonus in your monthly pay simply adds to your year-to-date earnings, and the 'extra' tax is not a different rate but the result of the bonus pushing that month's calculation into a higher band. Someone on a £40k base who receives a £10k bonus in one month is taxed that month as if they earned one twelfth of £40k plus the £10k, which is £13,333, an annualised £160k. A chunk of the bonus is therefore taxed at the higher rate even though the year-end figure may keep them in the basic-rate band. PAYE adjusts in the following months to even things out.

Bonuses can also trigger the 60% effective band. If your salary plus bonus pushes you over £100,000, the Personal Allowance taper begins: every £2 over £100k removes £1 of allowance, which costs 60% effective tax on the slice between £100k and £125,140. The usual response is to sacrifice the entire bonus into your pension if it would land in that band. If all of a £20,000 bonus falls between £100,000 and £125,140, sacrificing it into a pension saves £12,000 of income tax (60%) and £400 of NI at 2%, £12,400 in all. Pension is by far the most common form of bonus sacrifice, and many employers offer a bonus-time election to make it straightforward.

Other deductions react to a bonus as well. Student loans take 9% (Plans 1, 2, 4 and 5) or 6% (Postgraduate) of pay above the threshold for each pay period, such as £2,448 a month on Plan 2. Like NI, the deduction is not cumulative, so a bonus month takes 9% of everything above the monthly threshold and later months do not give it back. The extra simply comes off your loan balance. A refund from the Student Loans Company is only due if your income for the whole tax year ends up below your plan's annual threshold, and it is paid after the year ends. A bonus that pushes income over £60k starts the High Income Child Benefit Charge clawback, and because bonuses count as qualifying earnings for auto-enrolment, your 5% pension contribution may be calculated on the bonus too.

Timing around 5 April matters if you are close to a band threshold. A bonus paid in March falls under the current year's rates and allowances, while one paid in April shifts to the next tax year, and the paid date rather than the earned date decides which year applies. Budget announcements, usually in November or December, can change the brackets for the following April. Many employers structure payments to land before 5 April for staff who benefit from the current year, so if the date is flexible, it is worth asking HR.