Answers · UK 2025/26

Are bonuses taxed differently from salary in the UK?

No — UK bonuses are taxed at the same Income Tax and NI rates as salary. They just feel heavier because PAYE applies a higher marginal rate in the month they are paid, often pulling you briefly into the 40% or 60% band. Year-end PAYE rebalances if your annual total stays lower.

Last updated: 16 May 2026Last reviewed: 16 May 2026How we verify

Full answer

A £5,000 bonus added to a £40,000 salary is treated as ordinary employment income. The PAYE system spreads tax-free allowances across 12 months, so when a one-off lump lands the software assumes you will earn at that rate all year and deducts accordingly. Worked example: a £40,000 salary employee receives a £10,000 March bonus. That month's gross becomes £13,333; £4,189 stays in basic rate (20% = £838), the rest at 40% = £3,658, plus NI at 8%/2%. They net roughly £5,800 of the £10,000 in cash. Because their annual earnings (£50,000) actually stay inside the basic-rate band, HMRC issues a refund the following April or through code adjustments. Real higher-rate territory begins at £50,270; bonuses pushing income above £100,000 trigger the Personal Allowance taper (60% effective rate), and above £125,140 reach 45%. Sacrificing a bonus into a pension before it is paid avoids Income Tax AND both employee and employer NI — many employers share the 15% employer saving with the employee. Pension-sacrificed bonuses also keep earnings under HICBC (£60,000) and the £100k cliff.