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.

The deductions on a bonus include income tax at your marginal rate, employee National Insurance at 8% (or 2% above the Upper Earnings Limit) and any workplace pension contributions. If the bonus tips your income above £50,270, the portion above that threshold is taxed at 40% and NI drops to 2%.

This calculator adds your bonus to your annual salary to calculate the correct deductions. It shows the marginal rate applied to the bonus, the net bonus amount and a comparison showing your normal monthly pay versus the bonus month. Over the full year, HMRC's cumulative PAYE system ensures you pay the right total tax.

Why bonuses look like they're taxed extra. UK PAYE is cumulative, so a bonus in your monthly pay just adds to year-to-date earnings. The 'extra' tax isn't a different rate — it's because the bonus pushes you into a higher band for that month's calculation. Example: £40k base + £10k bonus in one month — month's tax is calculated as if you'd earn £40k × 1/12 + £10k = £13,333 that month (annualised £160k), so a chunk gets taxed at higher-rate even though the year-end might keep you basic-rate. PAYE adjusts in following months to even out.

Bonus and the 60% effective tax band. Bonuses are taxed at marginal rate. If your salary + bonus pushes you over £100,000, the Personal Allowance taper kicks in: every £2 over £100k removes £1 of allowance, costing you 60% effective on that slice (£100k-£125,140). Strategic move: sacrifice the entire bonus into pension if it would tip you into the 60% trap. £20,000 bonus into pension saves £12,400 (60% relief). Pension is the most common 'bonus sacrifice' — many employers facilitate this with a bonus-time election.

Bonus and student loan repayments. Student loans deduct 9% (Plans 1, 2, 4, 5) or 6% (Postgraduate) of earnings above the threshold. A bonus in one month creates an over-deduction (because the algorithm assumes that pay rate continues all year). At year-end, you'll have overpaid student loan — you can reclaim by writing to SLC OR wait for it to balance out across the year through subsequent low-bonus months. Most over-deductions of £100+ are worth reclaiming.

Year-end bonus timing — pay before or after 5 April? If you're close to a tax band threshold, timing matters. Bonus paid in March (before 5 April) is taxed at current year rates; bonus paid in April could shift to next year's rates. Pre-April Budget announcements can change brackets — usually announced in November/December. Many employers structure to pay before 5 April for staff who'd benefit. If unsure, ask HR for the pay date (paid date, not earned date, determines the tax year).

Why bonuses look like they're taxed extra. UK PAYE is cumulative — a bonus added to your year-to-date earnings. The 'extra' tax isn't a different rate, but because the bonus pushes you into a higher band for that month's calculation. £40k base + £10k bonus in month: tax calculated as if you'd earn £40k × 1/12 + £10k = £13,333 that month (annualised £160k) — chunk taxed at higher rate even though year-end might keep you basic-rate. PAYE evens out across the year.

60% effective rate on £100k-£125,140 bonus slice. Bonuses taxed at marginal rate. If salary + bonus pushes you over £100,000, the Personal Allowance taper kicks in: every £2 over £100k removes £1 of allowance, costing you 60% effective tax on that slice. Strategy: sacrifice entire bonus into pension if it would tip you into the 60% trap. £20,000 bonus into pension saves £12,400 (60% relief). Most common 'bonus sacrifice' — many employers facilitate this with bonus-time pension elections.

Bonus impact on student loan, child benefit, pensions. Student loan repayments: 9% deducted from bonus over threshold for that pay period — creates over-deduction (algorithm assumes that pay rate continues all year). Reclaim from Student Loans Company year-end if over £100. High Income Child Benefit Charge: bonus pushing income over £60k starts clawback. Pension Auto-Enrolment contributions: bonus included in 'qualifying earnings' — your 5% contribution may be calculated on bonus too.

Pre- vs post-April timing. Bonus paid in March = current tax year rates and allowance. Bonus paid in April = next tax year. If you're close to a band threshold, deferring/accelerating can save tax. UK Budget normally in November/December — possible bracket changes announced then for next April. Strategy: ask HR if bonus date is flexible. Many employers structure to pay before 5 April for staff who'd benefit from current year. Paid date (not earned date) determines tax year.