Employees often think a bonus is taxed at a special higher rate, because the bonus month's payslip shows a bigger deduction. It isn't: the bonus is added to that period's pay and the usual PAYE and National Insurance rules do the rest. This post shows how that works for 2026/27, with a worked example, and covers the cases that do have special rules: directors, bonuses paid on a separate day and bonuses paid after someone leaves.
Is a bonus taxed differently from salary?
No. A bonus is earnings, so it goes through PAYE like salary. HMRC's employer guide CWG2 (2026 to 2027) says to treat extra payments such as overtime, commission and bonuses as part of total pay at the time they're paid, no matter when they were earned. You report it on the Full Payment Submission for that payday, with the rest of the period's pay.
The bigger deduction in a bonus month comes from two things. Income Tax on a cumulative tax code compares the year's pay so far with the allowance and bands for the year so far, so the bonus is usually taxed at the employee's highest rate, and a large one can take part of that period's pay into the 40% band. National Insurance is worked out on each pay period on its own, so pay above the monthly upper earnings limit is charged at 2% rather than 8%, while employer National Insurance carries on at 15%.
Income Tax bands for 2026/27
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland has its own six bands for 2026/27, from a 19% starter rate to a 48% top rate, so a Scottish taxpayer's bonus is taxed on those. A large bonus can also cost the employee their Personal Allowance: GOV.UK says it goes down by £1 for every £2 of adjusted net income over £100,000 and is zero at £125,140. That is settled through their tax code or Self Assessment, not by a special payroll rate.
National Insurance on a bonus
| Monthly | Rate | |
|---|---|---|
| Primary threshold (employee NI starts) | £1,048 | 8% above it |
| Upper earnings limit | £4,189 | 2% above it |
| Secondary threshold (employer NI starts) | £417 | 15% above it |
Because National Insurance for employees is worked out per earnings period, a bonus month is looked at on its own. If you pay the bonus on a different day from salary but in the same earnings period, CWG2 says to work out National Insurance again on the total paid in the period, not on each payment separately.
Worked example: a £3,000 bonus on a £36,000 salary
An employee in England is paid £3,000 a month (£36,000 a year) on tax code 1257L, cumulative, and gets a £3,000 bonus in one month. National Insurance below uses the exact percentage method; HMRC's tables can differ by a few pence.
| Normal month | Bonus month | Difference | |
|---|---|---|---|
| Gross pay | £3,000 | £6,000 | £3,000 |
| Employee NI | £156.16 | £287.50 | £131.34 |
| Income Tax on the bonus, over the tax year | About £600 (20%) | ||
| Employer NI | £387.45 | £837.45 | £450.00 |
How the National Insurance figures are made: in a normal month, (£3,000 − £1,048) × 8% = £156.16. In the bonus month, (£4,189 − £1,048) × 8% = £251.28, plus (£6,000 − £4,189) × 2% = £36.22, so £287.50. Employer NI is (£6,000 − £417) × 15% = £837.45. The year's pay including the bonus is £39,000, which stays inside the basic-rate band, so over the tax year the bonus adds about £600 of Income Tax. In the bonus month itself the deduction can be higher if the bonus is paid early in the tax year, because a cumulative code spreads the basic-rate band across the year; later paydays even it out.
Change one number and the answer changes: on a £48,000 salary, the same bonus takes the year's pay over £50,270, and the part above it is taxed at 40%. The PAYE calculator works out the exact figures for a given pay date and pay so far.
Bonuses for company directors
Directors are the main exception for National Insurance. GOV.UK says a director's contributions are worked out on annual earnings rather than on each pay period. Each time you pay a director, you either work out National Insurance on their total pay for the tax year so far, including bonuses, or work it out on that period's pay, including bonuses, and check at the end of the year whether more employee National Insurance is due.
Dividends are a different thing, taxed under different rules and not through payroll. Our page on payslips for company directors covers a director's pay.
Bonuses paid after an employee leaves
Bonuses paid on or after someone's last day still go through PAYE. CWG2's rules for 2026/27:
- If you've already given the employee a P45, deduct Income Tax using code 0T on a week 1 or month 1 basis, using their normal pay period.
- Set the "payment after leaving" indicator on the FPS and show the original leaving date. Don't issue a second P45.
- Give the employee written confirmation of the payment: the date, the taxable amount, the tax deducted and that it is a post-leaving payment. A payslip can do this.
- For National Insurance, an expected bonus uses the usual earnings period; an unexpected bonus paid after the contract has ended uses a weekly earnings period.
What the payslip should show
Show the bonus as its own earnings line, so the employee can see it separately from basic pay, with Income Tax, National Insurance and any student loan deduction worked out on the period's total pay. Whether pension contributions apply to it depends on what your scheme counts as pensionable pay. The year-to-date figures then include it, and the P60 at the end of the tax year will too.
If the bonus is paid on a separate payday, give the employee a payslip for that payment too. Our guide to payslip legal requirements covers what every payslip has to include.
Where PayDocs fits
PayDocs makes the payslip from your payroll figures. The generator has a one-tap "Bonus" earnings line, so the bonus sits on its own row next to basic pay. PayDocs works out PAYE income tax, National Insurance and supported deductions for 2026/27 pay dates. Every line stays editable. You preview free and pay per payslip.
This is general information about the rules for employers in the UK, not tax or legal advice.
Questions
Is a bonus taxed at a higher rate in the UK?
No. A bonus is taxed as ordinary pay through PAYE. It can look higher because it's taxed at the employee's top rate for the year, and because a big month can take part of their pay into the 40% band.
Does a bonus affect National Insurance?
Yes. National Insurance is charged on the period's total pay including the bonus: 8% between £1,048 and £4,189 a month in 2026/27 and 2% above it for the employee, and 15% above £417 a month for the employer.
How is a bonus taxed after an employee leaves?
If the employee already has their P45, deduct tax using code 0T on a week 1 or month 1 basis, set the payment-after-leaving indicator on the FPS, and confirm the payment to them in writing.
Do directors pay National Insurance on bonuses?
Yes. A director's National Insurance is worked out on annual earnings, including bonuses, either cumulatively each payday or per period with a check at the end of the tax year.
Should a bonus show separately on the payslip?
It's good practice. A separate bonus line lets the employee see it apart from basic pay, while the tax and National Insurance on the payslip are worked out on the period's total pay.
Sources
- HMRC: CWG2, further guide to PAYE and National Insurance contributions (2026 to 2027)
- GOV.UK: Rates and thresholds for employers 2026 to 2027
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Income Tax rates, income over £100,000
- GOV.UK: National Insurance for company directors
Sources checked 7 October 2026. This article explains how pay documents work; it is not tax or legal advice.
