UK Bonus Tax Planning Complete Guide 2026/27
UK bonus tax 2026/27 - how PAYE taxes a bonus, marginal rates by income band, sacrificing a bonus into a pension, the £100k taper and the HICBC zone.
Bonus taxation: the same as salary, but timing matters
A bonus is taxed as employment income at your marginal rate. There is no special "bonus tax rate"; the bonus stacks on top of your salary for the year. The rates below are for England, Wales and Northern Ireland. Scotland has its own Income Tax bands, so its marginal rates differ.
Effective marginal rate by income zone
| Income band | Tax + employee NI | Net of £1,000 bonus |
|---|---|---|
| £12,570-£50,270 (basic) | 28% | £720 |
| £50,270-£60,000 (higher) | 42% | £580 |
| £60,000-£80,000 (HICBC zone, 2 children) | 53.7% | £463 |
| £80,000-£100,000 (higher) | 42% | £580 |
| £100,000-£125,140 (Personal Allowance taper) | 62% | £380 |
| £125,140+ (additional) | 47% | £530 |
Income bands are adjusted net income for the taper and HICBC rows. Excludes student loan repayments and pension contributions. HICBC assumes two children's Child Benefit for a full year.
The pension sacrifice strategy
If you give up a bonus under a salary sacrifice arrangement agreed before you become entitled to it (HMRC describes a salary sacrifice as giving up the right to future cash pay, and notes a one-off bonus can be sacrificed), the employer pays it into your pension instead. The cost to you is the net pay you forgo:
- Personal Allowance taper: £100 into the pension costs about £38 of net pay.
- HICBC zone (two children): £100 costs about £46.
- Higher rate: £100 costs about £58.
Worked example: £15,000 bonus on £95,000 salary
Figures from our salary engine for 2026/27, England, no other income or pension.
Without pension sacrifice:
- Total pay: £110,000, inside the Personal Allowance taper
- The first £5,000 of the bonus is taxed at 42% and the remaining £10,000 at 62%
- Net bonus: £6,700; £8,300 goes in tax and NI (55.3% effective)
With the whole £15,000 sacrificed into a pension:
- Take-home: £65,657 (on the salary alone: £65,657)
- £15,000 goes into the pension, at a cost of £6,700 of net pay forgone
- Each £1 of net pay given up buys about £2.24 of pension contribution
Pension money is locked away until minimum pension age and is taxed as income when drawn beyond any tax-free lump sum, so compare it with your need for cash now.
Related pages
Frequently asked questions
How is a UK bonus taxed in 2026/27?
As ordinary employment income through PAYE. There is no separate bonus tax rate: the bonus is added to your pay for the year and taxed at your marginal rates, with National Insurance deducted in the pay period it is paid.
Why does my bonus payslip show so much tax?
On a normal cumulative tax code, PAYE gives you your tax-free allowance and rate bands pro rata to date. A large bonus in one month can use up more of the basic-rate band than you have accrued so far, so more is taxed at the higher rate that month; if your income for the whole year stays lower, later months even this out. National Insurance is worked out per pay period, so earnings above the monthly Upper Earnings Limit are charged at the lower upper rate. If you are on an emergency or Month 1 code, the over-deduction is not corrected automatically during the year.
Should I sacrifice my bonus into a pension?
It can be very efficient where the bonus falls in a high marginal band. Under salary sacrifice, the bonus you give up is paid by your employer into your pension with no Income Tax or employee NI on it. Each £1 given up costs you the £1 of net pay you would have received: about £58 per £100 in the higher-rate band, £46 in the HICBC zone with two children and £38 in the Personal Allowance taper. From April 2029 the NI exemption on salary-sacrificed pension contributions is capped at £2,000 a year.
What is the £100k bonus trap?
Above £100,000 of adjusted net income the Personal Allowance falls by £1 for every £2, until it is gone at £125,140. In that range the effective rate is 62% (40% tax, plus the tax on lost allowance, plus 2% NI), so a £10,000 bonus inside the band leaves about £3,800. Sacrificing the part of the bonus above £100,000 into a pension keeps your allowance.
Can I defer a bonus to the next tax year?
Only by changing when you become entitled to it, and only if your employer agrees. Under ITEPA 2003 s.18, money earnings are treated as received at the earliest of when they are paid and when you become entitled to them (with extra rules for directors). Once you are entitled to a bonus, delaying the payment does not move it into a later tax year.
How does HICBC affect bonus tax?
The High Income Child Benefit Charge recovers 1% of Child Benefit for every £200 of adjusted net income between £60,000 and £80,000. With two children that adds about 11.7% to your marginal rate, 53.7% in total with higher-rate tax and NI. Pension contributions reduce adjusted net income. The charge is paid through Self Assessment, or employees can pay it through their PAYE tax code.
What about a bonus paid in shares?
Shares or restricted stock units are taxed as employment income when you acquire the shares, usually on their market value at vesting, and if the shares are readily convertible assets PAYE and NI apply. Tax-advantaged schemes such as SAYE, SIP, CSOP and EMI have their own rules. See our RSU and options guide.
When does my bonus get reported to HMRC?
Your employer reports it through Real Time Information when it pays it, with Income Tax and NI deducted at source. Most employees with only PAYE income have nothing further to do, but you may need a Self Assessment return for other reasons, for example untaxed income. Use HMRC's check tool to confirm.
Can I split a bonus between tax years?
Only if the entitlement itself is split - for example two separately earned payments that you become entitled to on different dates. Moving only the payment date does not change the tax year if you were already entitled to the whole amount.
Will my bonus affect my mortgage application?
Lenders set their own rules on how much bonus income they count and what evidence (such as payslips and P60s) they want. Regular bonuses with a track record are generally treated more favourably than one-off payments. Ask the lender or a broker how they treat yours.