Answers · UK 2025/26

How is bonus taxed at higher rate UK?

A bonus that pushes you into or above the £50,270 higher-rate band is taxed at 40% Income Tax plus 2% National Insurance — a 42% combined marginal rate. If the bonus tips total income above £100,000 the Personal Allowance tapers, creating an even worse 60% effective rate up to £125,140.

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

Full answer

Bonuses run through PAYE in the month they are paid. Example: £80,000 salary plus £20,000 bonus. The bonus sits entirely in the 40%/2% higher-rate band, so tax on the bonus is £8,000 + £400 NI = £8,400 of a £20,000 award, leaving £11,600 net (58%). If the same earner was on £95,000, £5,000 of the bonus pushes income above £100,000 — that slice loses Personal Allowance at £1 for every £2, so the effective rate on £5,000–£25,000 of additional income is 60% (40% IT + 20% lost allowance) plus 2% NI = 62%. From £125,140 upwards the additional rate of 45% kicks in (47% with NI). Three legitimate ways to reduce the hit: bonus sacrifice into pension (full relief at marginal rate plus 8%/2% NI saved and possible employer NI share-back), Gift Aid to a charity (extends basic-rate band by the gross donation), and timing — splitting a bonus across two tax years if your employer offers deferral. PAYE may temporarily over-deduct in the bonus month under cumulative coding, but year-end reconciliation refunds any overpayment.