Bonus Tax Calculator

Receiving a bonus is exciting, but many UK employees are surprised by how much tax and National Insurance is deducted before the money reaches their bank account. Unlike what many people believe, bonuses are not taxed at a special higher rate. Instead, they are treated as additional earnings and taxed at your marginal rate -- the rate that applies to the next pound you earn on top of your regular salary. For 2026-27, UK income tax rates are: 0% on the personal allowance (up to GBP 12,570), 20% basic rate (GBP 12,571 to GBP 50,270), 40% higher rate (GBP 50,271 to GBP 125,140), and 45% additional rate (above GBP 125,140). Employee National Insurance adds 8% between GBP 12,570 and GBP 50,270, and 2% above GBP 50,270. The total deduction rate on your bonus depends on where your salary already sits in these bands. If you earn GBP 35,000, your entire bonus falls in the basic rate band and faces 20% tax plus 8% NI -- a combined 28%. But if you earn GBP 48,000 and receive a GBP 5,000 bonus, part of the bonus crosses into the higher rate band, meaning the portion above GBP 50,270 is taxed at 40% plus 2% NI -- a combined 42%. The most costly scenario is when your salary is near GBP 100,000. Between GBP 100,000 and GBP 125,140, the personal allowance is gradually withdrawn at a rate of GBP 1 for every GBP 2 earned. This creates an effective marginal tax rate of 60% in that band (40% tax rate plus the effect of losing GBP 1 of allowance for every GBP 2). A bonus that pushes you into this zone will lose significantly more to tax than you might expect. Pension contributions can reduce the tax burden on a bonus. If your employer offers salary sacrifice for pension contributions, sacrificing some or all of your bonus into your pension avoids both income tax and National Insurance entirely, though the money is locked away until retirement.

How to Use This Calculator

To calculate the tax on your bonus: 1. Enter your annual salary (before the bonus). This is your regular gross salary as shown on your payslip or contract. Include any other taxable income you receive through PAYE. 2. Enter the bonus amount. This is the gross bonus before any deductions. 3. Optionally enter your pension contribution percentage. If you make pension contributions via salary sacrifice, enter the percentage here. This reduces both your salary and bonus for tax purposes. 4. Review the results. The calculator shows the income tax and National Insurance deducted from your bonus specifically, the total deductions, your net (take-home) bonus, and the overall marginal deduction rate. The pie chart visualises the split between your net bonus, tax, and NI. 5. Compare scenarios using the comparison tab. See how the same bonus is taxed differently at various salary levels to understand the impact of tax bands and the personal allowance taper.

How It Works

Bonus tax is calculated using the marginal method. This means we calculate the total tax on your salary alone, then calculate the total tax on your salary plus bonus, and the difference is the tax attributable to the bonus. The calculation steps are: 1. Calculate income tax on your salary only (using 2026-27 bands with personal allowance tapering above GBP 100,000) 2. Calculate income tax on your salary plus bonus (with the potentially different personal allowance) 3. Bonus income tax = Step 2 minus Step 1 4. Calculate employee NI on your salary only 5. Calculate employee NI on your salary plus bonus 6. Bonus NI = Step 5 minus Step 4 7. Total deductions = Bonus income tax + Bonus NI 8. Net bonus = Gross bonus - Total deductions 9. Marginal rate = Total deductions / Gross bonus x 100 If pension contributions are specified, both salary and total income are reduced by the pension percentage before any tax calculations. This reflects salary sacrifice arrangements where the pension deduction occurs before tax. This marginal method is more accurate than simply applying a single tax rate to the bonus, because it correctly handles scenarios where the bonus crosses a tax band boundary.

Worked Examples

When your employer processes a bonus payment, they may use a "month 1" or "week 1" emergency tax basis, which can result in higher upfront deductions than the annual calculation suggests. Any overpayment is corrected automatically through your PAYE code later in the tax year, or you will receive a P800 tax calculation from HMRC after the year ends. If you receive your bonus after 6 April but it relates to performance in the previous tax year, it is taxed in the year you receive it, not the year you earned it. The date the bonus appears in your pay determines the tax year. Strategies to reduce bonus tax include: salary sacrifice into your pension (avoids both tax and NI), making personal pension contributions (claim tax relief via self assessment), Gift Aid donations (extends your basic rate band), and timing your bonus to fall in a tax year where your other income is lower. Scotland has different income tax rates but the same NI rates. If you are a Scottish taxpayer, the income tax portion of your bonus deductions will differ, but the NI portion remains the same.