Answers · UK 2025/26

How is a bonus taxed in the UK in 2026/27?

A bonus is taxed as normal employment income through PAYE, at your marginal Income Tax rate (20%, 40% or 45%) plus employee National Insurance (8% up to £50,270, 2% above). Because it is often paid as a lump sum, PAYE can temporarily over-deduct tax in that pay period, though this typically corrects itself across the rest of the tax year.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

Full answer

Bonuses receive no special or reduced tax treatment in the UK -- they are simply added to your other pay and taxed through the normal PAYE system, though the lump-sum nature of bonus payments often creates confusion about the size of the deduction. **How the tax is calculated** Your employer adds the bonus to your salary for that pay period and calculates Income Tax and National Insurance on the combined total, using your existing tax code -- there is no separate "bonus tax rate"; it is simply taxed at whatever your marginal rate would be based on your total annual income including the bonus. **Why the deduction can look disproportionately large** PAYE's cumulative calculation assumes your current pay period reflects your ongoing annual rate -- a large bonus paid in a single month can therefore be taxed as though you earn that amount every month, pushing a chunk of it into higher tax bands temporarily, even if your true annual income (once averaged) would not actually reach those bands. **Salary sacrifice into pension as an alternative** Many employers allow bonus sacrifice, where some or all of your bonus is redirected into your pension via salary sacrifice instead of being paid as taxable cash -- this avoids Income Tax and National Insurance on the sacrificed portion entirely, making it a highly tax-efficient option for those who do not need the bonus as immediate cash, particularly higher earners. **Worked example** Someone earning a £45,000 salary receives a £10,000 bonus in one month. That month, PAYE may tax a significant portion of the bonus at 40%, since the annualised pay for that period looks much higher than their true salary -- but since their true annual income (£55,000) only has £4,730 in the higher-rate band (above the £50,270 threshold), the excess tax withheld in the bonus month should correct itself across subsequent months or via a year-end reconciliation. **Pension annual allowance and the 60% trap** A large bonus can push your adjusted net income above £100,000 (triggering the Personal Allowance taper and an effective 60% marginal rate in that band) or affect your pension annual allowance tapering if you are a very high earner -- sacrificing part of a bonus into your pension can help keep your adjusted net income below these key thresholds. **Bonus clawback and tax** If your bonus is subject to a clawback clause and you later have to repay some or all of it, reclaiming the tax already paid on the repaid portion is not automatic -- this typically requires a specific claims process, and the details can be complex, so seek advice if this situation arises. **Practical tip** Use the Bonus Tax calculator to see your expected take-home from a bonus before it is paid, and consider whether sacrificing some or all of it into your pension makes sense given your overall tax position, particularly if the bonus would otherwise push you into the £100,000-£125,140 tax trap zone.