Why is my bonus taxed so heavily?

A bonus is added to your salary in the month it's paid, so it is taxed at your marginal income-tax rate (up to 45%, or 60% between £100,000 and £125,140). You also pay National Insurance of 8% or 2%, plus student loan repayments if you have one.

Does a bonus affect your tax code?

Bonuses are usually paid through payroll in a single month, so your tax code is not changed. The extra tax is collected in that one pay period. A pension contribution via salary sacrifice can reduce tax on the bonus too.

Bonus calculator

See how much of a bonus actually lands in your pocket. Tax, National Insurance and student loan repayments are all deducted in the month your bonus is paid.

Your details

Tax yearNationGross annual salary

Bonus amount

0 if noneBonus monthPension methodEmployee pension %

Applied to bonus tooStudent loan plan

Postgraduate loan (6%)

£2,868

Net bonusAfter all deductions

42.6%

Effective bonus rateLost to tax, NI & loans

£1,346

Income tax on bonusAt marginal rate

£109

NI on bonusIf pay period is over UEL

Without the bonus your take-home is £36,090/year; with it, £38,957/year.

What eats the bonus

Item	Annual
Bonus	£5,000
Income tax	−£1,346
National Insurance	−£109
Student loan	−£428
Net bonus in your pocket	£2,868

Salary-sacrifice pension contributions apply to bonus too, so the net bonus is reduced only if you set a pension percentage; National Insurance on a bonus paid in one month is charged if that month crosses the primary threshold or upper earnings limit.

Uses 2026-27 HMRC rates. A bonus is taxed at your marginal income-tax rate and 8% NI up to the upper earnings limit, then 2% above it; student-loan and postgraduate repayments apply in the month the bonus is paid.

How bonuses are taxed

Bonuses count as income for the tax year they are paid, but unlike salary they usually arrive in one lump sum. That month's pay is measured against the personal allowance and higher-rate thresholds accumulated so far in the year, so a big bonus can push you into 40% or 45% tax for that period only. Your basic-rate salary stays put.

If you pay into a pension, workplace schemes usually take the contribution from bonus too, which lowers the tax. Structuring a bonus as salary sacrifice or as an employer pension contribution is one of the most effective ways to keep more of it.