Employment & Pay19 October 2026

How Much Tax Will I Pay on My Bonus? (2026/27)

Written and reviewed by, LLM (UK), CFP®·Published

How Much Tax Will I Pay on My Bonus? (2026/27)

A bonus is taxed exactly like the rest of your pay: there is no special bonus tax rate in the UK. Yet the payslip that carries it often looks alarming, with far more tax taken than you expected. Most of the time that is PAYE timing, not a real extra cost, and part of it comes back over the following months.

This guide explains what your bonus payslip is really doing, why the National Insurance on a bonus is often lower than an annual estimate suggests, the thresholds that can make a bonus expensive, and the moves that let you keep more of it.

Try it yourself: the Bonus Tax Calculator shows the tax, NI and student loan on your bonus, the bonus month payslip and the effect of sacrificing part of it into your pension.

Why the bonus month payslip looks so bad

Under PAYE, most employees are on a cumulative tax code such as 1257L. Each month payroll works out the tax due on your pay so far this tax year, using the allowances and bands you have built up so far, and deducts the difference from what has already been taken.

When a large bonus lands, the system briefly treats your year-to-date pay as if you will keep earning at that rate. More of the bonus falls into the higher-rate band than will be true by the year end, so the bonus month over-deducts. In the months that follow, your normal pay sits below that inflated pace, so slightly less tax is taken each month until the year is back in balance.

Worked example. An employee in England earns £45,000 a year (£3,750 a month) and is paid a £10,000 bonus in December, month 9 of the tax year.

Normal month December (bonus month)
Gross pay £3,750.00 £13,750.00
Income tax £540.50 £3,750.00
Employee NI £216.16 £442.50
Take-home pay £2,993.34 £9,557.50

December takes £3,209.50 more income tax than a normal month. But across the year the bonus only adds £2,946 of income tax: £4,730 of the bonus is above the £50,270 higher-rate threshold and taxed at 40%, the other £5,270 at 20%. The £263.50 difference is handed back through lower tax in January, February and March. If you leave before then, your P45 carries the position to your next employer.

Why the bonus month often costs less National Insurance

Income tax is cumulative. National Insurance for most employees is not. Each pay period is assessed on its own, using that month's thresholds: for 2026/27, employee NI starts at £1,048 a month, with 8% up to £4,189 and 2% above that. A bonus is simply part of the pay for the period in which it is paid.

So in the bonus month, everything above £4,189 pays only 2%, even though your annual pay is well below the annual Upper Earnings Limit of £50,270. That result is final: NI is not recalculated at the year end.

In the example above:

  • An annual estimate (NI on £55,000 less NI on £45,000) gives £516.20 of NI on the bonus.
  • The real figure, period by period, is £226.34.

So the true cost of the £10,000 bonus is £2,946 income tax plus £226.34 NI, leaving £6,827.66 in your pocket, about £290 more than the annual estimate of £6,537.80. A simple annual estimate overstates the NI on most bonuses below the Upper Earnings Limit. Company directors are different: their NI is normally worked out on an annual earnings period, so this effect does not apply to them.

The thresholds that make a bonus expensive

A bonus is added to your income for the year, so what matters is which bands it crosses.

Band your bonus lands in (rUK, 2026/27) Income tax NI (bonus month) Typical cost per £1,000 of bonus
Basic rate (to £50,270) 20% 8% or 2% £220 to £280
Higher rate (£50,270 to £100,000) 40% 2% £420
Child Benefit charge (£60,000 to £80,000) 40% plus charge 2% more, see below
Personal Allowance taper (£100,000 to £125,140) 60% 2% £620
Additional rate (over £125,140) 45% 2% £470

The High Income Child Benefit Charge. If you or your partner claim Child Benefit, the charge claws back 1% of it for every £200 of adjusted net income above £60,000, and all of it at £80,000. Take someone on £55,000 with two children who receives a £10,000 bonus: £5,000 of it falls in the charge band, so 25% of their £2,337.40 a year of Child Benefit, £584.35, is clawed back on top of £4,000 income tax and £200 NI. They keep £5,215.65 of the £10,000. Our guide to the HICBC explains how the charge is paid.

The £100,000 trap. A bonus that pushes adjusted net income past £100,000 starts withdrawing your Personal Allowance, giving an effective 60% income tax rate up to £125,140. We cover it in detail in the £100,000 tax trap, but there is a bonus-specific twist. PAYE normally gives you the full allowance in-year, because your tax code does not know about the bonus. Someone on £95,000 with a £15,000 March bonus owes £8,000 income tax on it, but PAYE collects only £6,000. The £2,000 gap is collected later, through a tax code change or a Self-Assessment bill, so set it aside.

Bonus sacrifice: turning a bonus into pension

Many employers let you exchange some or all of a bonus for an employer pension contribution. The sacrificed amount is never paid to you, so it escapes income tax and employee NI, and your employer saves its own NI at 15%.

The election has to be made before you become entitled to the bonus. Once the cash is yours, it is too late.

Worked example. The £45,000 earner sacrifices the £4,730 slice of the bonus that would have been taxed at 40%.

Amount
Bonus sacrificed £4,730.00
Income tax saved (40%) £1,892.00
Employee NI saved (2%) £94.60
Reduction in take-home pay £2,743.40
Employer NI saved (15%) £709.50
Added to pension if the employer passes on its saving £5,439.50

Without the pass-on, £4,730 goes into the pension for £2,743.40 of take-home pay, or 58p per £1. With it, the cost falls to about 50p per £1. Always ask whether your employer shares its NI saving: some do, and it is rarely advertised. In the £100,000 to £125,140 band the maths is even stronger, which is why bonus sacrifice is the standard escape from the 60% trap.

Two limits apply. Total pension contributions must stay within your annual allowance, normally £60,000 (with carry forward available for larger amounts). And a sacrifice cannot take your pay for the period below the National Minimum Wage. From April 2029, the NI exemption on salary-sacrificed pension contributions is due to be capped at £2,000 a year; that does not affect 2026/27.

Timing a bonus across tax years

Employment income is taxed in the tax year you are treated as receiving it, which is the earlier of when it is paid and when you become entitled to be paid (ITEPA 2003, section 18). A bonus paid on 31 March 2027 belongs to 2026/27; one you only become entitled to and are paid on 30 April 2027 belongs to 2027/28.

That matters when your income will be very different in the two years. If you expect lower income next year, for example because of parental leave, going part-time or a career break, a bonus received after 5 April 2027 may be taxed at a lower rate. The reverse applies if you expect a big pay rise. You usually cannot choose your payment date, and deferring a bonus you are already entitled to does not move it, but where a scheme lets you elect in advance, timing is worth raising.

The Autumn Budget on 28 October 2026 could change rates or thresholds for 2027/28, so check before relying on a future year.

Student loan on a bonus

Student loan repayments, like NI, are worked out per pay period. For a Plan 2 borrower the monthly threshold is £2,448.75 (£29,385 a year), and 9% is taken on pay above it.

  • If your salary is already above the threshold, 9% of the whole bonus goes to the loan. On the £10,000 example that is £900, cutting take-home from the bonus to £5,927.66.
  • If your salary is below the threshold, a bonus can trigger a deduction anyway. Someone on £24,000 with a £5,000 bonus has £409.61 taken in the bonus month, even though their £29,000 for the year is below the annual threshold. Gov.uk confirms you can ask for a refund after the tax year ends when your income for the whole year was under the threshold.

Whether paying more off your Plan 2 loan is good value is a separate question, covered in should you overpay your Plan 2 student loan.

Frequently asked questions

Is a bonus taxed at a higher rate than salary? No. It is taxed at your normal rates, and the extra tax in the bonus month is mostly a PAYE timing effect that reverses over the rest of the tax year.

Will I get a tax refund after my bonus? Usually not as a lump sum. On a cumulative code the over-deduction is corrected by lower tax in later months. If your code is on a non-cumulative basis (shown as W1, M1 or X), the correction may only come after the year end.

Why did my bonus take me into the 40% band if my salary is below £50,270? Because the bonus is added to your salary for the year. Only the part of the bonus above £50,270 is taxed at 40%.

Can I put my whole bonus into my pension? Often, if your employer offers bonus sacrifice and the contribution fits within your annual allowance. If not, a personal contribution to a pension also reduces adjusted net income, but you will not save NI.

The bottom line

A bonus is taxed at your marginal rate, not a special rate, and the shocking bonus month payslip is mostly PAYE catching up early. National Insurance is often lower than an annual estimate because the bonus month pays 2% above £4,189: on a £10,000 bonus at £45,000, the true NI is £226.34, not £516.20. The bonus becomes expensive when it crosses £60,000 with Child Benefit, or £100,000, and bonus sacrifice into your pension is the most effective fix.

Run your own figures in the Bonus Tax Calculator before you decide how much to sacrifice.

Related calculators and guides

This article is for general guidance only and is not personalised tax advice. Tax rules are complex and your circumstances may differ. For advice tailored to your situation, speak to a qualified accountant or tax adviser. Figures are for the 2026/27 tax year and sourced from gov.uk.

Sources

Rates and rules in this article are taken from the official pages below. Figures were checked against these sources at the last review date shown above; always confirm against the source before acting.

About the author

, LLM (UK), CFP®, CIM®, PFP®. Financial planner with 18 years in banking and wealth management, holding a UK master of laws and the Canadian CFP®, CIM® and PFP® designations. Writes and reviews every calculator and article on FinanceToolz.

Rates and thresholds in this article are taken from HMRC and GOV.UK. See our editorial policy for how content is sourced, reviewed and corrected. This is general information, not regulated financial advice.

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