Answers · UK 2025/26
How is overtime taxed in the UK?
Overtime is taxed the same as your normal pay: it joins your gross earnings and is taxed at whichever Income Tax band the extra pound falls into (20%, 40% or 45%), plus 8% Class 1 NI up to £50,270 and 2% above. There is no separate "overtime tax rate".
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HMRC treats overtime, shift bonuses and on-call payments as ordinary earnings. They are added to your gross monthly pay and run through PAYE alongside your salary. Worked example: a basic-rate worker earning £35,000 takes on £200 of overtime in a month. The £200 sits inside the basic-rate band so they pay 20% Income Tax (£40) and 8% NI (£16), keeping £144. If overtime pushes monthly pay above the higher-rate threshold (about £4,189 a month) the slice above is taxed at 40% plus 2% NI, so a £200 top-up retains only £116. Two situations can feel like a "punishment". First, PAYE annualises any pay spike — if January is unusually large, HMRC assumes you will earn that amount every month and over-deducts; the system self-corrects in February and March, or via a refund after year end. Second, overtime can drag you into the 60% effective rate between £100,000 and £125,140 because the Personal Allowance tapers away. Salary-sacrifice pension contributions on the overtime portion can recover tax and NI savings and bring earnings back below the £100k cliff. Student loan repayments and HICBC are also calculated on the higher gross including overtime.
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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.