How much tax will I pay on my bonus?

A bonus is taxed at your marginal rate, meaning the rate on the next pound you earn. If your salary keeps you in the basic-rate band, the bonus is taxed at 20% Income Tax plus 8% National Insurance, so 28% comes off. If the bonus pushes part of your income into the higher-rate band, that part is taxed at 40% Income Tax, and the National Insurance on earnings above £50,270 drops to 2%, so 42% comes off that slice. A student loan or pension contribution changes the figure again. These are 2026/27 figures for England, Wales and Northern Ireland and are estimates, not advice.

Why have I been taxed 40% on my bonus?

Two things are usually at play. First, if the bonus takes part of your income over £50,270 for the year, that part genuinely is taxed at the 40% higher rate. Second, and more often the surprise, PAYE works out tax each pay period as if that period repeated every month of the year. A large bonus in one month makes that month look like a much higher annual salary, so PAYE deducts as though you were a high earner all year. The over-deduction corrects itself across the rest of the tax year, so the true tax on the bonus is just your normal marginal rates.

How much tax gets taken off a bonus?

On a £5,000 bonus for a basic-rate taxpayer, roughly £1,000 goes in Income Tax (20%) and £400 in National Insurance (8%), leaving about £3,600 before any student loan or pension. For a higher-rate taxpayer whose income is already over £50,270, the same £5,000 loses about £2,000 in Income Tax (40%) and £100 in National Insurance (2%), leaving about £2,900. The exact split depends on where the bonus sits against the thresholds, and a single payslip can show more taken off before it settles over the year.

Do I pay National Insurance on a bonus?

Yes. A bonus is treated as earnings, so employee National Insurance applies just as it does to your salary. You pay 8% on earnings between £12,570 and £50,270 for the year, and 2% on anything above £50,270. So a bonus that sits inside the 8% band costs 8%, while a bonus on top of a salary already over £50,270 costs only 2% in National Insurance, even though the Income Tax on it may be 40%.

Will I get the tax on my bonus back?

Often, in part. If PAYE over-deducted in the month the bonus was paid, the system usually corrects it across the following pay periods of the same tax year, so later payslips show a little less tax taken and you effectively get the excess back through your pay. If it does not fully even out by the end of the tax year, HMRC reconciles it afterwards and may issue a refund or adjust your tax code. What you do not get back is the genuine tax on the bonus at your marginal rate, because that is correctly due.

Can I avoid tax on my bonus?

You cannot make a bonus tax-free, but you can legitimately reduce the tax by paying some or all of it into a pension through salary sacrifice, where you agree to give up the bonus before it is paid in exchange for a pension contribution. Done this way, the sacrificed amount escapes both Income Tax and National Insurance now, though you pay tax when you draw the pension later. Our salary sacrifice calculator shows the effect. Anything promising to dodge the tax outright is best treated with caution and checked with HMRC or a qualified adviser.

How is my bonus taxed?

There is no special bonus tax. A bonus is treated as ordinary earnings, so it is taxed at your usual rates: Income Tax at your marginal rate, employee National Insurance, plus a student loan and pension if they apply. If your bonus looks like it lost 40% or more, that is usually the way PAYE works out tax month by month, and it tends to even out across the tax year.

The short version

A bonus is taxed as normal pay, not at a separate bonus rate. It faces Income Tax, National Insurance and any student loan or pension.
The cost is set by your marginal rate, the rate on your next pound. A basic-rate earner loses 20% tax and 8% National Insurance; a higher-rate earner loses 40% tax and 2% above £50,270.
The month a bonus lands can look brutal because PAYE taxes that pay period as if it repeated all year, briefly over-deducting.
That over-deduction usually corrects itself over the rest of the tax year, through later payslips or your tax code, so the annual tax on the bonus is just your normal rates.
These are 2026/27 figures for England, Wales and Northern Ireland, and every result here is an estimate to plan with, not financial advice.

Here is what a bonus actually costs at the margin in 2026/27, by the band the bonus falls into. Your marginal rate is the combined rate on the next pound you earn, so it is the Income Tax rate plus the National Insurance rate that apply to that slice.

Where the bonus sits	Income Tax	National Insurance	Taken off the bonus
Basic-rate band (income £12,570 to £50,270)	20%	8%	28%
Higher-rate band (income £50,270 to £125,140)	40%	2%	42%
Additional-rate band (income above £125,140)	45%	2%	47%

Add a student loan and the slice gets a little larger again, usually 9% more on most plans. These are the rest-of-UK rates, meaning England, Wales and Northern Ireland; Scotland uses different Income Tax bands, covered below. To see your own salary and bonus worked out together, put them into the take-home pay calculator.

A bonus is taxed as normal income

A bonus is just earnings paid on top of your salary, so it goes through Pay As You Earn (PAYE), the system that takes tax and National Insurance straight from your wages, exactly like the rest of your pay. There is no separate bonus tax and no flat bonus rate. The bonus is added to your income for the year, and tax is charged on it at whatever rate that extra income falls into.

That rate is your marginal rate: the rate on the next pound you earn. If your salary already uses up your tax-free personal allowance and sits in the 20% basic-rate band, a bonus on top is taxed at 20% until your total income reaches £50,270, then at 40% above that. So a bonus can be taxed at one rate, or partly at one and partly at the next if it straddles a threshold. Only the part of the bonus that crosses into a higher band is taxed at the higher rate, never the whole amount.

Why the bonus month looks brutal

This is the part that catches people out. PAYE does not wait until the end of the year to settle up. It works out your tax fresh each pay period, and to do that it assumes the pay in that period is what you earn every period for the rest of the year. In a normal month that assumption is roughly right. In the month a big bonus lands, it is wildly out.

Say you earn £3,000 a month and get a £5,000 bonus in one of them. That month your pay is £8,000, and PAYE treats it as if you earned £8,000 every month, an annualised £96,000. On that basis a chunk of the month's pay looks like higher-rate income, so PAYE deducts 40% tax on part of it, which is why the payslip can look as though the bonus was taxed at 40% even when your real salary is nowhere near the higher rate.

It then corrects itself. PAYE is cumulative: each payslip looks at your total pay and total tax for the year so far and trues up the figures. In the months after the bonus, your pay drops back to normal, the year-to-date sums show you have paid too much, and PAYE deducts a little less than usual until it balances out. The effect is that the over-deduction comes back to you through later payslips, often within the same tax year. If it does not fully settle, HMRC reconciles it after the tax year ends and may refund the excess or adjust your tax code. The true tax on the bonus is only ever your normal marginal rates.

Emergency or month 1 tax codes can add to a one-off shock, but they are a separate issue, usually tied to starting a new job without a P45 rather than to the bonus itself. If you see a code like 1257 W1 or M1 on your payslip, that is the emergency code at work, and it too settles once HMRC has your full details.

National Insurance on a bonus

A bonus is earnings, so employee National Insurance applies to it. Unlike Income Tax, National Insurance is not cumulative across the year in the same way, and its rate actually falls on higher earnings. You pay 8% on earnings between £12,570 and £50,270 (the upper earnings limit, the point above which the rate drops), then just 2% above £50,270.

That has a neat consequence for a bonus on a higher salary. If your pay is already over £50,270, the bonus sits entirely above the upper earnings limit, so it only costs 2% in National Insurance even though the Income Tax on it is 40%. A bonus that sits inside the 8% band costs the full 8%. So the National Insurance on a bonus can be lower than you expect precisely when the Income Tax is highest.

Student loan and pension effects

If you are repaying a student loan, the repayment is a percentage of what you earn over your plan threshold, so a bonus that lifts your earnings further over the line means a larger repayment that month. On most plans that is 9% of the amount above the threshold, or 6% on a postgraduate loan. It is not extra tax, it just clears the loan faster, but it does come off the bonus in the month it is paid.

A workplace pension cuts the other way. On the common net-pay setup, a pension contribution is taken from your pay before Income Tax is worked out, so paying part of a bonus into a pension lowers the tax on it. Better still, if you arrange to give up a bonus before it is paid through salary sacrifice, the sacrificed amount avoids both Income Tax and National Insurance now, because you never legally receive it as pay. You pay tax when you draw the pension later, but the whole bonus goes to work in the meantime rather than being taxed up front. For the wider picture of how these deductions fit together, see how take-home pay works.

Scotland is different

Scotland sets its own Income Tax bands, so a Scottish taxpayer's bonus is taxed at Scottish rates rather than the rest-of-UK ones in the table above. Scotland uses six bands, from a 19% starter rate up to a 48% top rate, with the higher rates kicking in at different points, so the marginal rate on a bonus can differ from the 20% or 40% south of the border. National Insurance is the same everywhere, because it is set UK-wide. The take-home pay calculator covers both Scotland and the rest of the UK, so pick your region to get the right figure.

Common questions

How much tax will I pay on my bonus?: A bonus is taxed at your marginal rate, meaning the rate on the next pound you earn. If your salary keeps you in the basic-rate band, the bonus is taxed at 20% Income Tax plus 8% National Insurance, so 28% comes off. If the bonus pushes part of your income into the higher-rate band, that part is taxed at 40% Income Tax, and the National Insurance on earnings above £50,270 drops to 2%, so 42% comes off that slice. A student loan or pension contribution changes the figure again. These are 2026/27 figures for England, Wales and Northern Ireland and are estimates, not advice.
Why have I been taxed 40% on my bonus?: Two things are usually at play. First, if the bonus takes part of your income over £50,270 for the year, that part genuinely is taxed at the 40% higher rate. Second, and more often the surprise, PAYE works out tax each pay period as if that period repeated every month of the year. A large bonus in one month makes that month look like a much higher annual salary, so PAYE deducts as though you were a high earner all year. The over-deduction corrects itself across the rest of the tax year, so the true tax on the bonus is just your normal marginal rates.
How much tax gets taken off a bonus?: On a £5,000 bonus for a basic-rate taxpayer, roughly £1,000 goes in Income Tax (20%) and £400 in National Insurance (8%), leaving about £3,600 before any student loan or pension. For a higher-rate taxpayer whose income is already over £50,270, the same £5,000 loses about £2,000 in Income Tax (40%) and £100 in National Insurance (2%), leaving about £2,900. The exact split depends on where the bonus sits against the thresholds, and a single payslip can show more taken off before it settles over the year.
Do I pay National Insurance on a bonus?: Yes. A bonus is treated as earnings, so employee National Insurance applies just as it does to your salary. You pay 8% on earnings between £12,570 and £50,270 for the year, and 2% on anything above £50,270. So a bonus that sits inside the 8% band costs 8%, while a bonus on top of a salary already over £50,270 costs only 2% in National Insurance, even though the Income Tax on it may be 40%.
Will I get the tax on my bonus back?: Often, in part. If PAYE over-deducted in the month the bonus was paid, the system usually corrects it across the following pay periods of the same tax year, so later payslips show a little less tax taken and you effectively get the excess back through your pay. If it does not fully even out by the end of the tax year, HMRC reconciles it afterwards and may issue a refund or adjust your tax code. What you do not get back is the genuine tax on the bonus at your marginal rate, because that is correctly due.
Can I avoid tax on my bonus?: You cannot make a bonus tax-free, but you can legitimately reduce the tax by paying some or all of it into a pension through salary sacrifice, where you agree to give up the bonus before it is paid in exchange for a pension contribution. Done this way, the sacrificed amount escapes both Income Tax and National Insurance now, though you pay tax when you draw the pension later. Our salary sacrifice calculator shows the effect. Anything promising to dodge the tax outright is best treated with caution and checked with HMRC or a qualified adviser.

About this article

Written by the calcd team. We build UK money calculators and explain the numbers behind them in plain English. We checked the 2026/27 Income Tax bands and the employee National Insurance rates and thresholds in this article against gov.uk (HMRC) as the primary source. The figures here are estimates to help you plan, not financial advice. How a bonus actually shows up on your payslip depends on your tax code, when in the year it is paid, your pension and student loan arrangements, and whether you live in Scotland, so check your payslip and confirm anything important with HMRC. Last updated June 2026.

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