Answers · UK 2025/26
How can I reduce the tax on a one-off bonus payment?
You cannot avoid tax on a bonus entirely, but you can reduce the bill by sacrificing the bonus into your pension via salary sacrifice, avoiding both income tax and National Insurance.
Full answer
A bonus is taxable as employment income and subject to income tax and National Insurance in the same way as regular salary. However, there are legitimate strategies to reduce the tax impact. The most effective is to arrange with your employer for the bonus to be paid directly into your workplace pension via salary sacrifice, avoiding income tax at 20%, 40%, or 45% and employee NI at 8% or 2%. This works only if your employer agrees and the contribution does not breach the Annual Allowance of £60,000. Alternatively, you could make a personal pension contribution after receiving the bonus and claim higher-rate tax relief through Self Assessment. Spreading a bonus across two tax years is another tactic if your employer permits it, potentially keeping you in a lower band. HMRC anti-avoidance rules prevent artificial arrangements designed solely to avoid tax.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.