PAYE is worked out on your pay for the whole year so far, not on this month on its own. So anything that changes the running total, a bonus, a pay rise, a new job part way through the year, or a tax code change, makes one month look wrong even when nothing is broken.
The confusing part is that income tax and National Insurance are worked out in completely different ways. Tax looks at the whole year to date. National Insurance looks only at the month in front of it. That is why a bonus month can show much more tax and, as a share of your pay, less National Insurance.
How PAYE actually works
Most calculators divide your annual tax by twelve and show you the average. Real payroll does not do that. It runs a cumulative calculation every month.
Each month your payroll software does four things:
- Releases a slice of your tax-free allowance. With the standard 1257L code you get £12,579 free across the year, so one twelfth of it, £1,048.25, is released each month. By month nine you have had nine twelfths of it.
- Adds up everything you have been paid so far this tax year. The tax year runs April to March, so April is month 1 and March is month 12.
- Works out the tax due on that running total, with the bands widened by the same fraction. By month nine you have had nine twelfths of the £37,700 basic rate band, which is £28,275.
- Subtracts the tax you have already paid. What is left is this month’s deduction.
That last step is the whole story. Your payslip does not show the tax on this month’s pay. It shows the difference between what you should have paid by now and what you have already handed over.
Why a bonus month looks brutal
Take a £48,000 salary, paid £4,000 a month, with a £10,000 bonus in December.
In an ordinary month the tax is £590.35. In December it is £4,248.50. That is not a mistake. The arithmetic follows.
| December (month 9) | Figure |
|---|---|
| Pay so far this year | £46,000 |
| Tax-free pay released so far | £9,434.25 |
| Taxable pay so far | £36,565.75 |
| Basic rate band released so far | £28,275 |
| Tax due on the year so far | £8,971.30 |
| Tax already deducted (months 1 to 8) | £4,722.80 |
| December deduction | £4,248.50 |
The bonus pushed £8,290.75 of your year-to-date pay past the released basic rate band, so that slice is charged at 40%. On a £48,000 salary you are a basic rate taxpayer across the full year, but in that single month the running total temporarily crossed into higher rate territory.
Why your National Insurance went down
This is the part nobody explains, and it is the reason people think their payslip is wrong.
National Insurance is not cumulative. It is worked out on each pay period on its own, against monthly thresholds: 8% on earnings between £1,048 and £4,189 a month, then 2% on everything above £4,189.
So in that £14,000 bonus month:
- 8% on the slice from £1,048 to £4,189, which is £3,141, gives £251.28
- 2% on the £9,811 above £4,189 gives £196.22
- Total National Insurance: £447.50
That is 3.2% of the month’s pay. In an ordinary £4,000 month you pay £236.16, which is 5.9% of your pay. Your National Insurance bill went up in pounds but down sharply as a percentage, because most of the bonus sat in the 2% band.
Tax up, National Insurance proportionally down, in the same month. Both are correct.
The other reasons a month can jump
You got a pay rise. The cumulative calculation recalculates the whole year at your new level, so the first month after a rise often carries a catch-up on the months before it.
You started the job part way through the year. If you started in September you have six months of unused allowance. Depending on whether your employer got a P45 and is operating a cumulative code, you may see very low tax at first and then a correction.
Your tax code changed. A new code changes how much tax-free pay has been released. If it went down, the next payslip absorbs the whole difference at once.
You are on a Week 1 or Month 1 code. Codes marked W1, M1 or X are non-cumulative. Each month is treated as if it were the first month of the year, ignoring everything before it. This is a holding position HMRC uses when it does not have the full picture, and it very often overtaxes you until it is corrected.
You crossed £100,000. Above £100,000 your personal allowance is withdrawn by £1 for every £2 you earn. HMRC usually handles this by cutting your tax code rather than through the payroll calculation, so the change can land suddenly.
Will I get the money back?
If the extra tax was caused by a bonus and your annual pay still leaves you a basic rate taxpayer, then yes, and you do not need to do anything. The cumulative system corrects itself.
In the example above, January’s tax falls to £552.36, which is less than an ordinary month, because another twelfth of the allowance and the basic rate band has been released and the running total has caught up. The system quietly gives it back over the remaining months.
If you are on a Week 1 or Month 1 code, it will not correct itself during the year. You either get it back when HMRC reconciles after 5 April, or sooner if you get the code fixed. Check your code in your personal tax account and call HMRC if it looks wrong.
How to check your own months
Rather than guessing, put your own figures in and look at all twelve months side by side. Our month-by-month payslip checker runs the same cumulative calculation payroll uses, including bonus months, mid-year starts, pay rises and Week 1 codes, so you can see exactly which month the difference lands in and why.
If you want the plain annual picture instead, the take-home pay calculator gives the year, month, week and day figures with the bands shown.
Common questions
Why is my bonus taxed at 40% when I am a basic rate taxpayer? Because in the month it is paid, your year-to-date pay temporarily crosses the released basic rate band. Over the full year you stay basic rate, and the later months give the excess back.
Why did my National Insurance go down when my pay went up? National Insurance is charged on each month alone. Earnings above £4,189 in a single month are charged at 2% instead of 8%, so a large one-off payment is proportionally cheaper for National Insurance.
Do I need to claim the overpaid tax back? Usually not. On a normal cumulative code the correction happens automatically in the following months. On a W1, M1 or X code it does not, and you should get the code corrected.
Why is my first payslip in a new job taxed so heavily? If your employer has no P45 they may use an emergency code, which ignores the allowance you have not yet used. It normally settles once HMRC issues the correct code.
Is a second job taxed more? Not at a higher rate as such, but your allowance is usually given entirely against the first job, so the second job is often coded BR and taxed at 20% from the first pound.
Information, not financial advice. Figures use the 2026/27 rates for England, Wales and Northern Ireland and are estimates to help you understand the rules. Check your own circumstances against gov.uk or speak to a qualified adviser before acting on them.