UK · 2026 to 2027 tax year
Bonus tax calculator (UK)
Short answer
A UK bonus is taxed as ordinary pay in the month it's paid: PAYE income tax at 20%, 40% or 45% and employee National Insurance at 8%, or 2% on pay above £4,189 that month. On a £40,000 salary a £5,000 bonus loses £1,000 tax and £151.34 National Insurance, leaving £3,848.66. There is no special bonus tax rate.
| Item | Normal month | Bonus month |
|---|---|---|
| Gross pay | £3,333.33 | £8,333.33 |
| Income tax (PAYE) | −£457.00 | −£1,457.00 |
| National Insurance | −£182.83 | −£334.17 |
| Take-home | £2,693.50 | £6,542.16 |
Worked example: a £5,000 bonus on a £40,000 salary
An employee on £40,000 a year, tax code 1257L, paid monthly, gets a £5,000 bonus in December (tax month 9, 6 December to 5 January). Their normal month is £3,333.33.
| Normal month | Bonus month | Difference | |
|---|---|---|---|
| Gross pay | £3,333.33 | £8,333.33 | £5,000.00 |
| Income tax (PAYE) | £457.00 | £1,457.00 | £1,000.00 |
| National Insurance | £182.83 | £334.17 | £151.34 |
| Take-home | £2,693.50 | £6,542.16 | £3,848.66 |
- Tax to date in month 9: pay £34,999.97 less nine months' tax-free pay of £9,434.34 leaves £25,565 taxable. That is under nine twelfths of the £37,700 basic rate band (£28,275), so all of it is at 20%: £5,113.00.
- Less the £3,656.00 deducted in months 1 to 8 gives £1,457.00 for December, £1,000 more than a normal month: exactly 20% of the bonus.
- National Insurance on £8,333.33: 8% on £1,048 to £4,189 is £251.28, and 2% on the £4,144.33 above it is £82.89, so £334.17.
- The employer also pays £750 of National Insurance on the bonus: 15% of it, since the salary already uses the £417 monthly Secondary Threshold.
Figures from this calculator, using HMRC's 2026/27 PAYE tax table routines and National Insurance rates. General information, not tax advice.
Why the bonus month can look over-taxed
PAYE gives you the tax bands a month at a time. A large bonus early in the tax year fills that month's share of the basic rate band and spills into 40%, even if your pay for the whole year never reaches the higher rate. The extra tax isn't lost: the next months' cumulative calculation gives it back through less tax each payday.
| Paid in | Tax in the bonus month | Tax over the year | Back in later months |
|---|---|---|---|
| Month 1 (April) | £8,421.50 | £5,944.00 | £2,477.50 |
| Month 12 (March) | £5,944.00 | £5,944.00 | £0.00 |
On an emergency code with W1 or M1 (Week 1/Month 1), each month is taxed on its own, so nothing evens out within the year; HMRC refunds any overpayment after the year ends or through a new code.
Directors' bonuses and National Insurance
A company director has an annual earnings period for National Insurance (HMRC CA44). The same £5,000 bonus on a £40,000 director's salary costs £400 of National Insurance, 8% of all of it, because the director's earnings for the year (£45,000) stay below the £50,270 annual Upper Earnings Limit. An employee pays £151.34, because the bonus month alone goes over the monthly limit of £4,189.
The official method, step by step
- Add the bonus to the salary for the pay period it is paid in, whenever it was earned. HMRC's CWG2 says to enter an extra payment in the tax period you pay it.
- Work out PAYE on the cumulative basis: pay to date including the bonus, less tax-free pay to date from the tax code, taxed using the share of the year's bands reached by that month. Subtract the tax already deducted this tax year.
- No more than 50% of the month's pay can be deducted as tax (the overriding limit); anything above that is collected in later months.
- Work out employee National Insurance on that month's total pay alone: 8% from £1,048 to £4,189 and 2% above it. National Insurance is never cumulative for employees, so a bonus month can cross the Upper Earnings Limit even when the year doesn't.
- For a company director, National Insurance uses an annual earnings period: NI on the year's earnings to date against the yearly thresholds (£12,570 and £50,270), less what has already been paid.
- The bonus's real tax is the difference between the year's tax with and without it. Cumulative PAYE settles any overpayment in the bonus month through lower tax in the months after it.
What this leaves out
- Student loan and postgraduate loan deductions, which also come off a bonus month on the same pay (the payslip generator handles them)
- Pension contributions taken from the bonus, and bonus sacrifice into a pension
- The loss of personal allowance over £100,000, which a tax code doesn't apply by itself: HMRC changes the code or collects it after the year
- Salary paid in unequal months, weekly or four-weekly pay, and earlier months taxed on the wrong code
- Directors on the alternative arrangements, who pay monthly NI during the year and settle at the final payment
- Other income, like a second job or savings interest (codes starting S or C do get the Scottish or Welsh rates)
Sources: HMRC, CWG2 2026 to 2027 Employer further guide to PAYE and National Insurance contributions, section 1.12 (extra payments go in the tax period they are paid; for National Insurance they are part of total pay when paid) (read 8 October 2026); HMRC, CA44 National Insurance for company directors (2026 to 2027): annual earnings period and alternative arrangements (paragraphs 6 to 16) (read 27 September 2026); HMRC, Specification for PAYE Tax Table Routines, version 24.0 (February 2026), Appendices A–C (read 24 September 2026); HMRC, Rates and thresholds for employers 2026 to 2027 (read 24 September 2026).
Bonus tax calculator: common questions
How much tax will I pay on my bonus in the UK?
Your bonus is taxed at your highest rate once it's added to that month's pay: usually 20% income tax and 8% or 2% National Insurance for a basic rate taxpayer, 40% and 2% for a higher rate taxpayer. A £5,000 bonus on £40,000 leaves £3,848.66; on £60,000 it leaves £2,900.
Is there a special bonus tax rate in the UK?
No. A bonus is ordinary earnings. It goes through PAYE and National Insurance with the salary in the month it's paid, at the same rates as any other pay.
Why was so much tax taken from my bonus?
PAYE uses that month's share of the tax bands, so a big bonus can reach 40% in its month even if your year doesn't. On a cumulative tax code the difference comes back through lower tax in the following months. On a Week 1/Month 1 code it comes back after the year ends.
Will I get the extra tax on my bonus back?
On a normal cumulative code, yes, through your later payslips that tax year. A £20,000 bonus on £40,000 paid in April has £8,421.50 taken that month, but only £5,944 is due for the year, so £2,477.50 comes back by March.
Does a bonus push me into the 40% tax band?
Only the part of your year's taxable pay above £50,270 (on tax code 1257L) is taxed at 40%. If your salary plus bonus stays below that, the bonus is taxed at 20% over the year, whatever the bonus month's payslip shows.
How is a director's bonus taxed?
Income tax is the same as for an employee. National Insurance uses an annual earnings period, so it depends on the director's earnings for the whole tax year, not on the month: 8% on earnings from £12,570 to £50,270 for the year and 2% above.
Does my employer pay National Insurance on my bonus?
Yes. Employer National Insurance is 15% of earnings above the Secondary Threshold (£417 a month, £5,000 a year in 2026/27). A £5,000 bonus usually costs the employer another £750.
Can I make a payslip for the bonus month?
Yes. “Make the bonus payslip” opens the payslip generator with the bonus month's gross pay, income tax and National Insurance filled in. When you enter the real pay date, the generator asks you to recalculate from your payroll year to date or keep the amounts.
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