Bonuses are welcome surprises in your pay, but they can feel bittersweet once tax deductions take their bite. If you’ve wondered, “how much tax will I pay on bonus”, you’re not alone—and understanding exactly where your bonus ends up can empower you.
This article breaks down how bonuses are taxed in the UK for the 2025/26 tax year, using clear terms, official sources, and practical examples to guide you.
Summary:
“This intro sets the stage, introducing the keyword ‘how much tax will I pay on bonus’ and outlining the tax year focus and clarity of the content.”
What Is a Bonus and Why It’s Taxed Like Your Salary
A bonus—whether a one-off lump sum, performance reward, or end-of-year gift—is considered employment income and taxed just like your regular salary via the PAYE system. HMRC treats it as though it’s earned in that pay period and deducts Income Tax and National Insurance accordingly .
Summary:
“This paragraph explains that bonuses are treated as regular income and taxed under PAYE, according to HMRC.”
UK Income Tax Rates 2025/26 — The Basics
For England, Wales, and Northern Ireland in the 2025/26 tax year, Income Tax bands are:
- 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%.
Summary:
“This paragraph lays out the 2025/26 tax bands and rates relevant to bonus taxation.”
The Hidden 60 % Marginal Rate Trap
If your total income (including bonus) falls between £100,000 and £125,140, you lose £1 of your Personal Allowance for every £2 earned over £100,000. Combined with a 40% tax rate, this creates a 60% effective marginal rate.
Summary:
“This explains the 60 % marginal rate trap when income (with bonus) falls between £100k and £125k, wiping out allowance.”
National Insurance Contributions (NICs)
Alongside Income Tax, you pay NICs:
- 8% on earnings between £242/week (£12,570/year) and £967/week (£50,270/year),
- 2% on earnings above that upper limit.
Summary:
“This outlines the NIC rates applicable to bonus portions under PAYE for 2025/26.”
PAYE Timing: Why Bonuses Feel Steeper in the Month Paid
PAYE treats your bonus as though it’s a recurring salary for the year; tax software annualises that one pay period. So when your bonus hits, your monthly tax deductions spike—even though your annual tax might smooth out later.
Summary:
“This clarifies that PAYE annualisation makes one-off bonuses feel heavily taxed in that pay period.”
Example: How Much Tax Will I Pay on Bonus?
Let’s say:
- Annual salary: £45,000
- Bonus: £5,000
Your total taxable income becomes £50,000. The bonus falls entirely in the 20% band, so:
- Income Tax: 20% of £5,000 = £1,000
- NICs: 8% of £5,000 = £400
Total deductions: £1,400, meaning a take-home bonus of £3,600.
Summary:
“This example demonstrates how much tax and NICs will typically be deducted from a bonus, with clear numbers.”
What If Your Bonus Pushes You Into Higher Rates?
If your salary is £48,000 and you get a £7,000 bonus, £2,270 of that bonus falls into the 40% Higher Rate band. That portion is taxed more heavily, plus NICs. The rest of the bonus (in the 20% band) is taxed as before. So:
- 20% on first £1,730 = £346
- 40% on £2,270 = £908
- NICs: 8% on entire bonus = £560
Total tax & NICs ≈ £1,814, leaving about £5,186 take-home from your £7,000 bonus.
Summary:
“This shows how a bonus partly taxed at higher rate works—with both bands’ tax and NICs applied.”
Resource Alert: HMRC Guidance
You can refer to HMRC’s official site for up-to-date metrics on personal allowances, tax bands, PAYE, and NICs for 2025/26. For employers, HMRC technical guidance confirms how bonuses must be treated under payroll.
Summary:
“This paragraph links to HMRC’s official guidance on 2025/26 tax bands, PAYE, and employer bonus treatment for credibility.”
Ways to Reduce Tax on Your Bonus Legally
- Pension or Bonus Sacrifice: You may request your employer to pay your bonus directly into your pension, reducing both Income Tax and NICs—but note the money is locked in until your pension age.
- Annual Pension Allowance: Keep your total pension contributions within your annual allowance (up to £60,000) to benefit from full tax relief.
- Tax Code Review: Confirm your tax code is accurate—anything off can mean over- or under-taxed bonuses. Use your online Personal Tax Account or check your payslip, P60, or HMRC notices.
Summary:
“This outlines legal strategies to reduce tax on bonuses: pension contribution, bonus sacrifice, and keeping tax code accurate.”
What Happens After the Tax Year Ends
If PAYE over-deducted tax on your bonus, HMRC usually adjusts this after 5 April. You may get a refund through your next payslip or via a P800 calculation. Always check your P60 or P45 at year-end to confirm tax figures.
Summary:
“This explains HMRC’s annual adjustment process after year-end that may refund overpaid tax.”
Conclusion: What Really Matters
To recap: “how much tax will I pay on bonus” depends on your total annual income, relevant tax band thresholds, NICs, and how PAYE treats lump sums.
Understand the 2025/26 bands, factor in NICs, watch out for the 60% trap, and consider pension strategies to keep more of your bonus. Planning ahead ensures your bonus remains as rewarding as it feels.
Summary:
“This final paragraph sums up the key takeaways, reinforcing the keyword and offering actionable insight.”
FAQs
Q1: How much tax will I pay on bonus if I’m a basic rate taxpayer?
You’ll pay 20% Income Tax plus 8% NICs on the bonus.
Q2: How much tax will I pay on bonus pushing me into higher rate?
Only the portion above the 40% threshold is taxed at 40%, plus NICs; rest at 20%.
Q3: How much tax will I pay on bonus if my income goes over £100,000?
Between £100k–£125,140, you face an effective 60% marginal rate due to losing Personal Allowance.
Q4: How can I reduce how much tax I pay on bonus?
You can sacrifice it into your pension or check your tax code; both can lower tax and NICs.
Disclaimer: The tools and content on TaxCalculatorUK are for informational purposes only and do not constitute tax or financial advice. Our calculators provide basic estimates and may not reflect the latest tax laws.
We recommend consulting a certified tax professional or the HM Revenue and Customs Dept (HMRC) for accurate guidance. TaxCalculatorUK is not responsible for any decisions made based on the information provided.
