Bonus Tax: How Much Will You Actually Take Home?
Bonuses are taxed through PAYE in the same way as salary — but the timing of a bonus payment can significantly affect how much tax you pay on it. Understanding how bonus tax works helps you plan when to receive a bonus, whether to sacrifice some of it, and what to expect on your payslip.
How Is a Bonus Taxed?
A cash bonus is added to your salary for the pay period in which it is paid and taxed through PAYE at your marginal income tax rate. National Insurance is also charged in the same way as on regular salary. There is no special bonus tax rate — the rate depends on which income tax band the bonus falls into.
Example: You earn £35,000 per year (monthly gross: £2,917) and receive a £5,000 bonus in one month. That month's gross pay is £7,917. Your employer calculates tax on the annualised equivalent of £95,000 for that month, applying higher rate tax on the amount above £50,270. Your bonus is not taxed at a flat rate — it is taxed at 40% only on the portion that pushes your annualised pay above the higher rate threshold.
The Cumulative vs Month 1 Effect
If you are on a cumulative tax code (like 1257L), your employer accounts for all the tax paid so far this year and may actually refund some tax if you had a low-income period earlier. If you are on a Month 1 or Week 1 code, each pay period is treated independently — you may temporarily pay more tax on the bonus than necessary, receiving a refund later in the year.
Rough Take-Home by Tax Band
| Your band | Income tax rate | NI rate | Approx take-home from £1,000 bonus |
|---|---|---|---|
| Basic rate (up to £50,270) | 20% | 8% | ~£720 |
| Higher rate (£50,271–£125,140) | 40% | 2% | ~£580 |
| Additional rate (above £125,140) | 45% | 2% | ~£530 |
Note: these are approximate figures. Your actual take-home also depends on your specific tax code, pension deductions, student loan repayments and other factors.
Timing Your Bonus
If you have some control over when a bonus is paid, the timing can matter. A bonus paid at the end of one tax year versus the start of the next can change your total income for each year, potentially keeping you in a lower tax band or preserving your Personal Allowance.
If you earn near £50,270 or £100,000, a bonus could push you into a higher band or cause Personal Allowance tapering. Consider salary sacrifice into a pension to offset the effect — especially if your income would otherwise fall in the £100,000–£125,140 range where the effective marginal rate is 60%.
Salary Sacrificing Your Bonus
Some employers allow you to sacrifice all or part of a bonus directly into your pension. If your employer offers this, it is one of the most tax-efficient things you can do with a bonus — especially if it keeps your adjusted net income below a threshold like £50,270 or £100,000. The bonus goes in as a gross pension contribution with no income tax or NI deducted.
Non-Cash Bonuses
Non-cash bonuses (gift vouchers, goods, experiences) are classed as benefits in kind and may be treated differently. Trivial benefits under £50 are exempt from tax. Larger non-cash bonuses are generally taxed at their cash equivalent value through PAYE or on a P11D. Some share-based awards (EMI options, SAYE schemes) have their own tax treatment and can be more tax-efficient.
Will My Regular Pay Be Affected?
On a cumulative code, a large bonus month is often followed by lower-than-usual tax in subsequent months as the cumulative system rebalances across the year. Some people are surprised to see a smaller deduction the following month — this is normal and correct.
Frequently Asked Questions
Frequently Asked Questions
Marcel Tonet
AAT Qualified · CeMAP Qualified · Tech & Financial Services
Marcel is an AAT-qualified accounting technician and CeMAP-qualified mortgage adviser with a career spanning technology and the UK financial services industry. He built and maintains Salary Take Home UK, updating all tax rates and thresholds each April for the new tax year.
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