How bonuses are taxed
By NetPayFinder team · Updated 5 October 2026 · Figures for the 2026/27 tax year, computed from official rates
How income tax, National Insurance and student loans apply to a bonus, why your bonus payslip can look over-taxed, and how a pension changes what you keep.
A bonus is a welcome boost, but the amount that lands in your bank account is often less than people expect. Bonuses are taxed in the same way as your salary, but the way PAYE works means your bonus payslip can look very different from a normal month. This guide explains why and how to work out what you’ll keep.
How a bonus is taxed
There’s no special rate of tax for bonuses. Income tax, National Insurance and student loan repayments apply to a bonus just as they do to your salary. HMRC treats a bonus as earnings for the tax year in which it’s paid, as GOV.UK’s guidance on Income Tax rates explains.
What matters is how much your total pay for the year comes to once the bonus is added, and which bands the extra pay falls into. If your bonus takes you over the higher-rate threshold of £50,270, the part above it is taxed at 40%. If it takes your income above £100,000, you also start to lose your Personal Allowance, which can mean an effective rate of 60%. Our guide to the Personal Allowance taper trap explains this.
How much of a bonus you keep over the year
Take someone on a £45,000 salary who receives a £5,000 bonus in December, with no pension or student loan. Over the whole year, they keep £3,600 of the bonus, or 72%. Part of the bonus is taxed at the basic rate and part at the higher rate, because it takes their total pay above £50,270.
Why your bonus payslip looks different
PAYE works out income tax cumulatively. Each month, your employer looks at your total pay so far in the tax year and the allowance and bands available up to that month. In your bonus month, the extra pay uses up more of the bands, so more of it falls into the higher rate than in a normal month.
In our example, a normal December payslip would show income tax of £540.50 and take-home pay of £2,993.34. With the bonus, the income tax for December is £1,750.00 and take-home pay is £6,657.50.
Because PAYE is cumulative, income tax usually evens out by the end of the year, so you pay the right amount overall. You don’t normally need to claim anything back, unless your code was wrong or you had a gap in employment.
National Insurance on a bonus
National Insurance works differently. It’s worked out on each payday separately, using monthly thresholds, and it doesn’t even out over the year. Employees pay 8% on pay between the monthly primary threshold of £1,048 and the monthly upper earnings limit of £4,189, and 2% above it.
In our example, NI for a normal month is £216.16. In the bonus month it’s £342.50, because most of the bonus falls above the monthly upper limit and is charged at the lower rate. For someone on a lower salary, much more of a bonus can fall between the two thresholds and be charged at the main rate. Our guide to National Insurance explains the thresholds.
Student loans and bonuses
Student loan repayments are also worked out on each period’s pay. In a bonus month, you repay a share of everything above your plan’s monthly threshold, including the bonus. If your total income for the year ends up below the threshold, you can ask for a refund, but for most people with a bonus that won’t apply.
Paying a bonus into your pension
Many employers let you sacrifice some or all of a bonus into your pension before it’s paid. Because the sacrificed amount isn’t paid as salary, you save income tax and National Insurance on it at your marginal rates. Your employer also saves employer NI, and some pass this on.
This can make a big difference if your bonus would take you into the higher rate, or into the Personal Allowance taper, or above the threshold for the High Income Child Benefit Charge. The bonus tax calculator shows what you keep with a pension contribution on the bonus, and the salary sacrifice calculator shows the effect on your pension. Our guide to salary sacrifice covers the wider effects.
Bonuses paid after you leave
If you leave a job and your employer pays you a bonus after your P45 has been issued, the payment is usually taxed using the code 0T on a non-cumulative basis. That means no tax-free allowance, so tax may be taken at a higher rate than you’d expect. If you’ve overpaid by the end of the tax year, HMRC refunds the difference, usually after sending a tax calculation letter. GOV.UK’s guide to tax codes explains how 0T codes work.
Timing your bonus
The tax year runs from 6 April to 5 April. A bonus paid on 5 April counts in one tax year, and one paid on 6 April in the next. If your income varies from year to year, the timing can affect which bands the bonus falls into. Your employer may have fixed dates for bonuses, but if you have a choice, it can be worth checking your expected income for both years.
Checking your bonus payslip
On your bonus payslip, check that:
- The bonus is shown as a separate line of pay, with the right amount.
- Your tax code hasn’t changed unexpectedly.
- Income tax and NI look reasonable for your total pay that month.
- Any pension contribution on the bonus is shown, if you asked for one.
Our guide to reading your payslip explains each line. If you’re thinking about a pay rise rather than a one-off payment, the pay rise calculator shows how much of a rise you keep each month.