Bonus tax worked examples: 2026/27
Bonus Tax 2026/27: How Much UK Tax You Pay on a Bonus
Complete guide to UK tax on bonuses in 2026/27. There is no special "bonus tax rate" - bonuses are taxed as additional salary at the marginal Income Tax + NI rate based on your total income stack. 20 worked combinations across 4 base-salary levels and 5 bonus sizes, the "60% bonus tax" PA-taper trap above £100k, PAYE cumulative-code march-month confusion explained, bonus sacrifice into pension as the most tax-efficient mitigation (~100% net "boost" on every £1 sacrificed).
Quick answer
A bonus is taxed at your marginal Income Tax + Employee NI rate based on the income band the bonus pushes you into. There is no special bonus tax. Effective rates by band:
| Total income band | IT | EE NI | Combined |
|---|---|---|---|
| £12,571 - £50,270 | 20% | 8% | 28% |
| £50,271 - £100,000 | 40% | 2% | 42% |
| £100,001 - £125,140 (PA taper) | 60% | 2% | 62% |
| Above £125,140 | 45% | 2% | 47% |
Bonus tax matrix - 4 salaries × 5 bonus sizes
Each cell shows the TOTAL tax (IT + NI) on the bonus, plus the effective tax rate on the bonus only.
Base salary £30,000
| Bonus | Bonus IT | Bonus NI | Total tax | Net bonus | Effective rate |
|---|---|---|---|---|---|
| £1,000 | £200 | £80 | £280 | £720 | 28.0% |
| £5,000 | £1,000 | £400 | £1,400 | £3,600 | 28.0% |
| £10,000 | £2,000 | £800 | £2,800 | £7,200 | 28.0% |
| £25,000 | £5,946 | £1,716 | £7,662 | £17,338 | 30.6% |
| £50,000 | £15,946 | £2,216 | £18,162 | £31,838 | 36.3% |
Base salary £50,000
| Bonus | Bonus IT | Bonus NI | Total tax | Net bonus | Effective rate |
|---|---|---|---|---|---|
| £1,000 | £346 | £36 | £382 | £618 | 38.2% |
| £5,000 | £1,946 | £116 | £2,062 | £2,938 | 41.2% |
| £10,000 | £3,946 | £216 | £4,162 | £5,838 | 41.6% |
| £25,000 | £9,946 | £516 | £10,462 | £14,538 | 41.8% |
| £50,000 | £19,946 | £1,016 | £20,962 | £29,038 | 41.9% |
Base salary £75,000
| Bonus | Bonus IT | Bonus NI | Total tax | Net bonus | Effective rate |
|---|---|---|---|---|---|
| £1,000 | £400 | £20 | £420 | £580 | 42.0% |
| £5,000 | £2,000 | £100 | £2,100 | £2,900 | 42.0% |
| £10,000 | £4,000 | £200 | £4,200 | £5,800 | 42.0% |
| £25,000 | £10,000 | £500 | £10,500 | £14,500 | 42.0% |
| £50,000 | £25,000 | £1,000 | £26,000 | £24,000 | 52.0% |
Base salary £110,000
| Bonus | Bonus IT | Bonus NI | Total tax | Net bonus | Effective rate |
|---|---|---|---|---|---|
| £1,000 | £600 | £20 | £620 | £380 | 62.0% |
| £5,000 | £3,000 | £100 | £3,100 | £1,900 | 62.0% |
| £10,000 | £6,000 | £200 | £6,200 | £3,800 | 62.0% |
| £25,000 | £13,521 | £500 | £14,021 | £10,979 | 56.1% |
| £50,000 | £24,771 | £1,000 | £25,771 | £24,229 | 51.5% |
The "my bonus was taxed at 60%" trap
The £100,000-£125,140 Personal Allowance taper zone has a 62% effective marginal rate on every £1 of additional income (40% IT + 20% PA-loss + 2% NI). A bonus pushing you into this band gets taxed at this much higher effective rate.
Worked example: £95,000 base + £15,000 bonus = £110,000 total. PA is tapered to £12,570 - £5,000 = £7,570. Original tax with £95k salary: ~£24,432 IT + £4,194 NI = £28,626. With bonus: tax on £110k income = £30,432 IT + £4,494 NI = £34,926. Bonus contribution to tax: £6,300 of which £4,500 is direct IT on £15k × ~60% effective + £300 NI = 44% effective on the bonus itself.
Mitigation: bonus sacrifice into pension is the most cost-effective escape. £15k bonus sacrificed = ANI stays at £95k = full PA preserved + TFC retained + HICBC stays at lower level. Effective benefit of pension contribution at this margin: 60% IT + 2% NI + 25% gov top-up if LISA-eligible + 15% employer NI top-up if passed through = potentially 100%+ "boost" on every £1 sacrificed.
Bonus sacrifice into pension - the optimal move
Sacrificing all or part of a bonus directly into pension instead of taking it as cash is the single most tax-efficient annual move available to higher-rate earners.
- Arrange BEFORE bonus is contractually due (typically 30-day window before payment date) - cannot sacrifice retrospectively.
- Instruct employer in writing to pay all or part of the bonus into your workplace pension instead of to you.
- The sacrificed amount: no IT, no employee NI, no employer NI (saved by company - good employers pass through to your pension as a top-up).
- Bonus sacrifice still counts toward your £60,000 Annual Allowance (AA). Carry-forward of unused AA from previous 3 years lets you sacrifice up to £240k in one tax year if you have the headroom.
- Money stays in pension until age 55 (57 from April 2028).
Worked example - higher-rate earner, £30k bonus. Take as cash: £30k × 42% tax = £12,600 → £17,400 net. Sacrifice into pension: £30k pension + £4,500 employer NI top-up = £34,500 pension contribution for £17,400 of cash you gave up = "boost rate" of 98%. Effectively paying £17,400 to BUY £34,500 of pension. The Treasury subsidises 50% of your retirement saving via this route.
Frequently asked questions
How are bonuses taxed in the UK for 2026/27?
A bonus is taxed exactly like additional salary — Income Tax 20%/40%/45% + Employee NI 8%/2% — stacked on TOP of your normal salary in the tax band stack. There is no special "bonus tax rate". The reason bonuses APPEAR to be taxed at a higher rate than your regular salary is band-stacking: a £5,000 bonus paid in March doesn't get the £12,570 Personal Allowance (you already used that against your salary), and it sits ENTIRELY in your highest tax band. A higher-rate earner on £60k base sees: £5k bonus × 40% IT + £5k × 2% NI = 42% tax = £2,100, take-home £2,900. Same person's regular monthly £5k of salary sees: ~28% effective (mix of basic and higher) = £1,400 tax. The bonus "feels" worse because it's all at marginal rate, not blended. PAYE cumulative tax codes mean the bonus month payslip can show even higher in-month deduction that reconciles in subsequent months.
Why was my bonus taxed at 60%?
Most likely explanation: you're in the £100,000-£125,140 "Personal Allowance taper" zone. Above £100k of total income, your £12,570 Personal Allowance is withdrawn at £1 for every £2 above £100k. A £10k bonus on a £95k base pushes total income to £105k = £2,500 of PA lost = £2,500 of previously tax-free income exposed to 40% tax = £1,000 of EXTRA tax just from PA loss. Combined with the £10k × 40% direct IT = £4,000 IT total + £10k × 2% NI = £200 = £4,200 tax on £10k = 42% direct, BUT the PA-loss adds £1,000 = total £5,200 = 52% effective. For larger bonuses fully in this band: £5,000 × 60% effective IT + 2% NI = 62% combined. Second possible cause: PAYE cumulative system over-deducting in the bonus month (will reconcile in subsequent months). Third possible cause: emergency tax code (BR / 0T / 1257L M1) - in which case the bonus is taxed at full 20%/40% without PA in that month, reconciled at year-end via P800.
Is my bonus subject to National Insurance?
Yes - bonuses are EARNINGS for NI purposes (Section 4 SSCBA 1992). Employee NI 8% on bonus portion stacked within the £12,570-£50,270 band, 2% above £50,270. Employer pays Class 1A NI at 15% (raised from 13.8% April 2025) on the bonus, charged to the company not the employee. For most higher-earning employees the bonus NI rate is 2% (because their base salary already exceeds £50,270 UEL). Worked example: £80k base + £20k bonus. £20k bonus is entirely above £50,270 UEL → 2% NI = £400 EE NI on £20k = £19,600 after NI but before IT. Then 40% IT on £20k = £8,000. Net bonus = £20k - £400 - £8,000 = £11,600. Effective rate 42%.
Can I avoid tax on my bonus by paying it into my pension?
Yes - "bonus sacrifice" is the single most tax-efficient single annual move available to higher-rate earners. Mechanism: BEFORE the bonus becomes contractually due (typically a 30-day window before payment date), you instruct your employer in writing to pay all or part of the bonus directly into your pension instead of to you. Tax / NI saved: 40% IT + 2% NI = 42% saved by the employee, PLUS 15% employer NI saved (which good employers pass through to your pension as a top-up). Worked example: £20k bonus, higher-rate earner. Take as cash: £20k × 58% = £11,600 net. Sacrifice into pension: £20k pension contribution + £3k employer NI top-up = £23k of pension contribution for £0 cash you would have received anyway (since the bonus wasn't yours yet). Effectively "buying" £23k of pension contribution for the £11,600 cash you gave up = 98% boost. Best for: bonuses you don't need for current spending, accumulators planning to retire in 10+ years, parents near the £100k cliff (TFC + PA + HICBC stack). Cannot be done AFTER the bonus is paid - must be PRE-arranged.
Why does my March bonus payslip look like the tax was massive?
PAYE cumulative tax-code mechanic. Each pay period your employer's payroll system runs a cumulative annual income calculation: (total YTD income × annual tax rate) - (tax already deducted YTD) = current period's deduction. In a bonus month, YTD income suddenly jumps - so the system "catches up" tax that would have been owed if the bonus had been spread across all months. This makes the BONUS MONTH PAYSLIP show very high deduction. In subsequent months (April onwards if bonus was March, or remaining months of the current tax year), the system over-corrects and shows REDUCED tax to balance out. Net annual position is correct. If you're new to a job mid-tax-year or have an unusual code, the in-month deductions can be even more dramatic but always reconcile by 5 April. Check via HMRC personal tax account or P60 at year-end. Common error: people assume the bonus-month deduction is permanent - it's NOT, subsequent months balance it.
What about a bonus that pushes me into the £100k zone?
60% effective marginal IT (40% IT + 20% PA-loss) + 2% NI = 62% combined for the £100,000-£125,140 band. A £30,000 bonus pushed from £95k to £125k base = roughly £15,000+ of tax on the bonus (50% effective). Plus HICBC clawback if you claim Child Benefit (up to additional 17% for 3-child family between £60-80k threshold - though the HICBC band sits below the £100k zone). Plus loss of TFC if claimed (£100k cliff = whole family loses ~£2-4k/year of childcare top-up). For typical higher earners with children, a £30k bonus crossing the £100k threshold can have effective marginal rate north of 70% once all the cliffs and tapers are summed. Mitigation: bonus sacrifice into pension is the single best escape. £30k bonus sacrificed = £0 ANI increase = retain PA + TFC + (avoid HICBC if relevant) + save 42% IT/NI on the contribution amount.
Is signing-on bonus / golden hello taxed the same?
Yes - all forms of cash payment from employer to employee count as earnings under Section 62 ITEPA 2003 (the general charge to tax on employment income). This includes: signing-on bonus, golden hello, retention bonus, performance bonus, discretionary bonus, contractual bonus, sales commission, year-end bonus, project bonus, profit-share, deferred-payment bonus, "thank you" gifts above the £50 Trivial Benefits limit. All taxed at marginal IT + NI rates. The £30,000 termination payment exemption (Section 401-403 ITEPA) does NOT cover bonuses paid AT termination - only true compensation for loss of employment (e.g. severance, redundancy beyond statutory). Notice pay even in PILON form is fully taxable as earnings under Section 402D ITEPA. Sales commission is taxable in the period earned (when sale is recognised under the commission contract), not when actually paid.
What about share-based bonuses - RSUs, options, share awards?
Different tax treatment. RSUs (Restricted Stock Units): taxed as employment income at VESTING (when shares actually transfer to you), at marginal IT + NI rates on the vest-date market value. Subsequent sale of those shares: CGT on any gain above vest-date base cost. EMI options (Enterprise Management Incentive): government-approved scheme. NO Income Tax / NI on grant or exercise (if exercise price is at least market value at grant). Only CGT on disposal, at potentially BADR rates 18% on first £1m lifetime. Unapproved options: IT + NI on the GAIN at exercise (market value at exercise minus exercise price). Share Incentive Plans (SIP) / Save As You Earn (SAYE): government-approved, mostly tax-favoured if held 5 years. Sharesave (SAYE option scheme): no tax on exercise if 3+ year hold. Cash and share bonuses can be mixed - the share portion follows share rules, cash portion follows cash bonus rules. See our employee share schemes guide for the full comparison.
How is a bonus taxed if I'm self-employed?
Self-employed people don't get "bonuses" in the technical sense - all your trading profit IS effectively your income. The profit becomes income via SA on your year-end accounts. If you receive a one-off lump sum from a client (e.g. project completion payment), it's just trading income in the period earned, taxed at marginal IT + Class 4 NI rates 6% / 2% on profit above £12,570 LPL. No special bonus treatment. For limited-company owners paying themselves via salary + dividend, a "bonus" can mean either (a) extra salary paid via PAYE (taxed like an employee bonus + employer NI 15% to the company), or (b) extra dividend (taxed at 8.75% / 33.75% / 39.35% dividend rates with no NI). The dividend route is generally more tax-efficient at higher income levels - see our optimum director salary 2026/27 for the full salary + dividend split optimisation.
What if I split my bonus across multiple tax years?
Possible if the bonus is contractually deferrable - the employer can defer part of the bonus to the NEXT tax year, splitting the tax hit. Worked example: £40k bonus due March 2026. Take all £40k in March 2026: pushed over £100k ANI → PA taper + TFC cliff + 60% effective marginal rate on most of it. Defer £25k to April 2026 (next tax year): split £15k in 2025/26 + £25k in 2026/27 = both years stay under £100k = retain PA in both years, retain TFC, retain Child Benefit. Tax saving can be £5k-£15k depending on circumstances. Constraints: employer must agree to deferral (not all employers offer this); the deferred amount must be "constructively received" only in the later year (no early access); regulated financial-services firms have specific deferral rules under FCA / PRA remuneration codes; deferral creates risk that the employer might fail to pay in the future. Not available retrospectively - bonus already paid cannot be "un-paid" and re-allocated. See HMRC EIM00580 on the timing of employment income recognition.
Are there any tax-free or partially-exempt bonus types?
Very limited. (1) Trivial Benefits £50: employer can give up to £50 of non-cash benefit (e.g. gift vouchers, meal, hamper) tax-free, up to £300/year for close-company directors. Cannot be cash, cannot be contractual, cannot reward specific performance. (2) Long Service Awards: tax-free up to £50 per year of service after 20+ years of service (Section 323 ITEPA). One-off cash bonus to mark long service is NOT covered - must be a tangible gift. (3) Employee suggestion scheme: tax-free up to £25 for encouragement awards + up to £5,000 for accepted suggestions under specific conditions (Section 321 ITEPA). (4) Awards from a third party: gifts from a person OTHER than your employer (e.g. customer-funded "spiff" awards in retail) may sometimes escape PAYE but are still typically reportable income. NOT exempt: cash bonus of any size, gift cards worth more than £50, "thank you" payments above £50, vouchers convertible to cash, performance-linked rewards.
When should I expect my bonus on payslip?
Depends on your employer's payroll calendar. Most companies pay annual bonuses in: March (calendar year-end alignment, common for retail / banking / FMCG); April (financial year-end alignment); July (calendar half-year); October-December (Christmas bonus, common in banking and professional services). The payslip will show: gross bonus amount, tax deducted (cumulative), NI deducted, take-home. P60 issued by 31 May for the previous tax year shows annual totals INCLUDING the bonus. If the bonus year-of-receipt differs from year-of-award (e.g. deferred bonus), the recognition is based on payment date for Income Tax and NI. RSU vests are reported separately on the vesting payslip with the GBP market value at vest. Disputes about bonus payment timing should be raised with HR + payroll before the year-end P60 is issued - retrospective corrections require an SA filing and can trigger P800 reconciliation by HMRC.
Related calculators and guides
- Bonus tax calculator - interactive tool with all UK / Scottish bands.
- Bonus sacrifice calculator - interactive sacrifice vs cash comparison.
- Salary sacrifice 2026/27 - regular monthly sacrifice mechanics.
- Higher-rate tax 40% guide - the £50,270 threshold the bonus stacks against.
- £100k tax trap - the 62% PA-taper zone bonuses often trigger.
- Max pension contribution calc - £60k AA + carry-forward for big bonus sacrifices.
- Employee share schemes - RSU / EMI / SIP / SAYE bonus alternatives.
- Child Benefit tax charge (HICBC) - the £60-80k cliff bonuses can trigger.