Bonus tax calculator
What reaches your account out of a bonus, and the rate it is really taxed at.
- Bonus
- £0
- Income tax
- £0
- National Insurance
- £0
- Student loan
- £0
- Into the pension
- £0
- You keep
- £0
There is no such thing as bonus tax
A bonus is ordinary earnings, taxed under exactly the same rules as salary. What makes it feel different is where it lands. Your salary has already used the personal allowance and worked through the basic rate band, so the bonus starts at your top rate and stays there. You are not being taxed more harshly, you are seeing your marginal rate rather than your average one, probably for the first time.
The £100,000 trap
Between £100,000 and £125,140 the personal allowance falls by £1 for every £2 earned. You lose allowance while paying 40% on the income above, which produces an effective marginal rate of 60%, or 62% once National Insurance is added.
A bonus that crosses £100,000 is therefore the most expensive money most people ever earn. A £10,000 bonus on a £100,000 salary leaves about £3,800. The same bonus on a £60,000 salary leaves about £5,800, on the same rules, because it is nowhere near the taper.
Why the payslip looks worse than this
Payroll uses cumulative PAYE, which taxes each period as though the year carried on at that rate. The month a bonus arrives can look like an extraordinary year, so the deduction is too large. HMRC unwinds it across the remaining months, or refunds it at year end. The annual figure here is the one that finally settles.
Sacrificing it instead
Salary sacrifice means giving up the bonus before it becomes pay, so it never attracts income tax or National Insurance and the whole amount reaches the pension. Tick the box and compare. In the 60% band the arithmetic is unusually favourable: roughly 38p of take-home given up for every £1 that lands in the pension. It is also the only reliable way to get back under £100,000 once the money has been offered.
The catch is access. Pension money is locked until the minimum pension age, so this is a decision about when you need it, not only about tax.
Common questions
- Is a bonus taxed at a higher rate than salary?
- No. A bonus is ordinary earnings and there is no separate bonus tax. It feels punitive because it lands on top of a salary that has already used up your allowance and your basic rate band, so the whole bonus is taxed at your top rate rather than your average one.
- Why did my payslip take even more than this?
- Payroll taxes each pay period as though the year continued at that rate, so the month you receive a bonus can look like a very high-earning year. HMRC corrects it over the remaining months or at year end. This shows the annual position, which is the one that settles.
- What is the 60% band, and why does the rate here go above 40%?
- The personal allowance falls by £1 for every £2 earned above £100,000, so between £100,000 and £125,140 you lose allowance as well as paying tax. The effective marginal rate over that band is 60%, and 62% once National Insurance is counted. A bonus that pushes you into it is the most expensive money you will ever earn.
- Should I put the bonus into my pension instead?
- Tick the sacrifice box and compare. Sacrificing the bonus means it never becomes pay, so it escapes income tax and National Insurance entirely and the whole amount reaches the pension. In the 60% band that is unusually good value: you give up around 38p of take-home for every £1 that lands in the pension.
- Is anything I type here sent anywhere?
- No. Everything is calculated in your browser. No salary or bonus figure is uploaded, stored, or logged.