Answers · UK 2025/26

Why was my bonus taxed so heavily in the month I received it?

PAYE assumes one month's pay repeats all year, so a big bonus can briefly be taxed as if you earned it every month, pushing that slice into 40% or even the 60% trap. It is not extra tax - cumulative coding corrects it over later months, and any overpayment comes back in your pay.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

PAYE works out tax each payday by annualising your pay to date, which is fine for steady salaries but can over-tax a one-off bonus in the month it lands. The system effectively projects that month's higher pay across the year, so part of the bonus can be taxed at the higher 40% rate (or, between GBP 100,000 and GBP 125,140, at the 60% effective rate as the Personal Allowance tapers GBP 1 for every GBP 2). Example: normal salary GBP 45,000 (GBP 3,750/month), plus a GBP 10,000 bonus in one month makes that month's pay GBP 13,750. Year-to-date projection can briefly treat some of the bonus as higher-rate, so the tax taken that month looks disproportionately large, and you also pay 8% National Insurance on most of the bonus but only 2% on any part of monthly earnings above the GBP 50,270/12 threshold. The key point: on a cumulative tax code this self-corrects. In the following months, as your year-to-date pay falls back in line, less tax is deducted and any overpayment is effectively refunded through payroll, so your full-year tax on GBP 55,000 total is the same as if the GBP 10,000 had been spread out. The exception is a Week 1/Month 1 code, which does not self-correct mid-year - any overpayment is then reconciled after year end via a P800. Salary sacrificing a bonus into your pension is one way to avoid the spike entirely. Model the one-off month with the Take-Home Pay and Income Tax calculators, and read how PAYE annualises pay at gov.uk/income-tax.