One-Off Bonus or Permanent Pay Rise? The 2026/27 Maths
Offered a GBP 3,000 bonus or a GBP 2,500 permanent rise? The tax treatment is the same, but the long-term value is not. Here is how to compare the two fairly in 2026/27.
When an employer offers a choice between a one-off bonus and a smaller permanent pay rise, the headline numbers rarely tell the whole story. The tax treatment is identical, so the real decision is about timing, recurrence and what each does to your pension and future pay.
Same tax, different shape
A bonus is treated as employment income, taxed at the same rates as salary. For a basic-rate taxpayer that is 20% income tax and 8% employee National Insurance, leaving 72p in the pound. A higher-rate taxpayer keeps 58p.
A bonus can look heavily taxed in the month it is paid because PAYE may temporarily apply a higher rate, assuming that month's pay continues all year. This corrects itself over the tax year, so the effective rate is the same as on salary.
Worked example: GBP 3,000 bonus versus GBP 2,500 rise
Compare a basic-rate taxpayer offered either a one-off GBP 3,000 bonus or a permanent GBP 2,500 rise.
The bonus, after 20% tax and 8% National Insurance:
- Net value: about GBP 2,160, paid once
The permanent rise, after the same deductions:
- Net value: about GBP 1,800 a year, every year
In year one the bonus delivers more cash. By the end of year two the recurring rise has paid out about GBP 3,600 net, overtaking the bonus and continuing to compound in every year after.
What the recurring rise also lifts
A permanent rise does more than repeat. It raises the base your future pay decisions hang on:
- Employer pension contributions are usually a percentage of salary, so the rise increases them too
- Future percentage raises are calculated on the higher base
- Mortgage affordability and references use your salary, not past bonuses
- Statutory and contractual pay linked to salary can rise
A bonus does none of these. It is a single payment with no compounding effect.
When a bonus is the better choice
A bonus can win in specific situations:
- You need cash now for a defined goal rather than a steady uplift
- You expect to leave the role soon, so the recurring rise has little time to pay off
- You want to sacrifice the bonus into a pension to manage a threshold such as GBP 100,000
Bonus sacrifice is particularly powerful near the 60% trap, because the full gross bonus enters the pension before tax and National Insurance, and it reduces adjusted net income.
Quick decision checklist
- Convert both offers to after-tax values
- Count how many years you expect to stay
- Check the effect on employer pension contributions
- Consider bonus sacrifice if near GBP 100,000 or GBP 50,270
To compare the offers on a like-for-like basis, model each in the CalcHub take-home pay calculator and confirm the rates and pension rules on gov.uk.
Frequently asked questions
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