Bonus tax calculator
A bonus is taxed like any other pay, but one big payslip can make it look worse than it is. This shows what you actually keep across the year.
How a bonus is taxed
Your bonus is added to your salary and taxed at whatever rate the total reaches. If your salary is already in the 20% band and the bonus keeps you there, the bonus is taxed at 20% plus 8% or 2% National Insurance. If the bonus tips you into the 40% band, the part above the threshold is taxed at 40%. There is no separate bonus tax; it is added on top of your salary.
The shock on a payslip comes from timing. PAYE assumes each month is typical, so a large bonus in one month is briefly taxed as if you earned that much every month. The extra usually washes out over the following months, which is why the annual figure above is the more reliable measure.
National Insurance moves the other way, which is why the bonus payslip rarely matches any annual estimate. Income tax is cumulative and self-corrects, but National Insurance is settled one pay period at a time. A bonus lifts that single month above the monthly upper earnings limit, so the slice above it is charged at 2% instead of 8%. Student loan repayments behave like National Insurance rather than tax: they are taken per period and never adjusted afterwards, so a spike month permanently increases what you repay for the year. The month-by-month payslip calculator runs the whole year one payday at a time and shows the correction arriving.
Two situations stop the tax correcting itself. On an emergency W1 or M1 code each payday is taxed in isolation, so nothing looks back across the year; the emergency tax refund estimator sizes what is owed back. And a bonus paid in March leaves no later payslips in that tax year, so any excess is settled after the year end through a P800 calculation instead. Checking the code on the payslip with the tax code checker is the quickest way to tell which case applies.
Worked example
On a £35,000 salary, a £5,000 bonus stays inside the 20% band. You pay 20% income tax and 8% National Insurance on it, so you keep about £3,600 of the £5,000. If the same bonus pushed you over £50,270, the part above would be taxed at 40%.
Common questions
Why was my bonus taxed so much?
PAYE spreads your allowance and tax bands evenly across the year. A big one-off bonus in a single month can push that month into a higher band, so more tax is taken than the bonus really owes. Over the rest of the year it usually balances out, so the annual figure is what matters.
How much of my bonus will I keep?
On a £35,000 salary a £5,000 bonus leaves you about £3,600 after £1,400 of income tax and National Insurance, an effective 28.0% on the bonus.
Is a bonus taxed at 40%?
Only the part of it that reaches the higher-rate band is. Income tax works in slices, so a bonus is added to the salary you already have and taxed at whatever rates the total passes through. If your salary and bonus together stay under £50,270 the whole bonus is taxed at 20%. If the salary is £48,000 and the bonus is £6,000, roughly £2,270 of it is taxed at 20% and the rest at 40%.
Will I get the tax back on my bonus?
If too much was taken it is refunded, usually without any action on your part. PAYE is cumulative, so each payslip recalculates the tax due on your pay for the year to date and adjusts. Once the months after the bonus are back to normal pay, the excess comes back as lower tax on those payslips. The exceptions are an emergency W1 or M1 code, which does not look back across the year, and a bonus paid in March, which leaves no later payslips to correct it before the tax year ends.
Why did my National Insurance go down in my bonus month?
National Insurance is worked out on each pay period on its own, not cumulatively. A large bonus pushes that month well past the monthly upper earnings limit, and everything above it is charged at 2% rather than 8%. So the bonus month often carries less National Insurance than an annual estimate implies, even while it carries more income tax. The two effects partly cancel out, which is why a bonus payslip is hard to reconcile against any yearly calculator.
Is my student loan taken from my bonus?
Yes, and unlike income tax it is not corrected later. Student loan repayments are worked out per pay period, so a bonus month deducts 9% of everything that month above one twelfth of your plan threshold, whether or not your yearly income would have produced that much. There is no cumulative adjustment in later months, so a spike month permanently raises the amount repaid that year.
Can I pay less tax on my bonus?
Sacrificing the bonus into your pension before it is paid is the main route. Because salary sacrifice gives up gross pay, the amount diverted carries no income tax and no employee National Insurance, and many employers add their own National Insurance saving to the contribution. It has to be agreed before you become entitled to the bonus, so the timing matters. Charitable giving through payroll giving works the same way for income tax.
Do I pay National Insurance on a bonus?
Yes. A cash bonus paid through payroll is earnings, so employee National Insurance applies at 8% or 2% depending on where the pay falls in the month. Non-cash awards are treated differently: vouchers and similar benefits are usually reported and taxed through your tax code rather than deducted from the payslip.
How much tax will I pay on a £5,000 bonus?
On a basic-rate salary a £5,000 bonus loses 20% income tax and 8% National Insurance, so about £1,400 goes and roughly £3,600 reaches your account. On a higher-rate salary the same bonus loses 40% and 2%, leaving about £2,900. On the £35,000 example above, a £5,000 bonus leaves £3,600. Enter your own figures to see the split.