Bonus tax calculator UK

A bonus counts as pay of the period in which it is paid, whenever it was earned (HMRC employer further guide, CWG2). There is no separate bonus rate. Payroll adds the bonus to that month's or week's salary and runs PAYE on the total. NI and any student loan repayment are then worked out on the same period's pay. Take a salary of £35,000 paid monthly and a £2,000 bonus in December, which is tax month 9. Income Tax takes £400.00, NI £116.34, and £1,483.66 reaches the account, about 74% of the gross. The payslip shows the bonus on its own line, but the deductions cover salary and bonus together. The calculator separates them by running the month twice, with and without the bonus, and reporting the difference.

Each step copies HMRC's routine (Taxable Pay Tables Manual Method). Free pay comes from the code, taxable pay to date is rounded down to the pound, and tax to date to the penny. Under 1257L the free pay is £1,048.25 a month. The results match the checked cases listed further down.

A few situations fall outside the estimate, so a real payslip can differ from it.

• Company directors, whose contributions use an annual earnings period.
• K codes, tax week 53, and income from a second job, a pension or savings.
• Tax held back in earlier months by the regulatory limit: the salary is taken as paid evenly from April.
• The yearly figure treats this job as your only income and uses the statutory allowance with its taper, even under a flat code such as BR.
• Weekly pay, which is placed on a payday on the 28th of the month.

Because PAYE works on the cumulative basis: each month it compares your taxable pay so far with the bands so far, not with the whole year's bands. The basic rate of 20% covers the first £37,700 of taxable pay in a year. The higher rate of 40% runs up to £125,140, and the additional rate of 45% applies above it (HMRC, rates and thresholds for employers 2026 to 2027). These bands sit on top of the personal allowance of £12,570.

By tax month 9, the basic rate band to date is nine twelfths of the yearly one, £28,275. A bonus that lifts cumulative taxable pay above that line pays 40% on the excess that month, even when the year's income stays inside the basic rate band. On a £45,000 salary, a £5,000 December bonus loses £1,208.00 to tax on the payslip. Over the year it adds only £1,000.00, all at the basic rate.

The £208.00 gap is timing, not extra tax. The band to date grows each month, so the January to March payslips take less and the year ends level. The earlier the bonus arrives, the wider that gap.

A tax month runs from the 6th to the 5th, so month 9 is 6 December to 5 January. The marginal rate row adds the yearly tax and the bonus's NI, then divides by the bonus: 22.53% here. Your P60 shows the year's total, which timing never changes. If the job ends before the gap closes, the rest comes back as a tax refund.

Scottish taxpayers pay Scottish income tax on a bonus, with bands set by the Scottish Parliament, while NI is the same across the UK. The six rates are 19%, 20%, 21%, 42%, 45%, 48%. The 42% rate starts at £31,092 of taxable income, well below the £37,700 line elsewhere.

That difference shows on a bonus. On £45,000 in Scotland, a £2,000 bonus loses £840.00 to tax, against £400.00 for the same pay in England. HMRC issues Scottish codes with an S prefix, and the calculator reads a plain code as the S code when Scotland is chosen.

Employee contributions are worked out per earnings period and never cumulatively, so a bonus is simply added to that week's or month's pay. The rate is 8% between the primary threshold of £1,048 a month and the upper earnings limit of £4,189, then 2% above it (HMRC, rates and thresholds for employers). The weekly figures are £242 and £967.

The default bonus lifts December's pay from £2,916.67 to £4,916.67. Part of it is charged at 8% up to the limit and the rest at 2%, £116.34 in all. On £60,000 the salary already passes the limit every month, so a £5,000 bonus pays only £100.00. Each part is rounded to the nearest penny, with half a penny rounded down.

Because each period stands alone, contributions taken in a bonus month are final. Unlike Income Tax, no later payslip or refund evens them out.

A code ending in M1, W1 or X puts payroll on the Month 1 basis, or Week 1 for weekly pay: each period is taxed as if it were the first of the year. A code such as 1257L M1 is the usual emergency tax code, used when payroll lacks your details. Only one month's free pay and bands apply, so taxable pay above £3,141.67 in the month goes to 40%.

Under 1257L M1, the default December bonus loses £545.26 to tax instead of £400.00. Nothing is carried forward on this basis, so the £145.26 extra stays deducted until a cumulative code replaces the emergency one or HMRC repays it once the year is over.

A bonus paid after your P45 was issued is taxed under code 0T on a Month 1 basis (CWG2). There is no free pay, so every pound is taxed from the first band. Paid that way, the default bonus loses £400.00 to tax and £76.16 to NI, with no salary alongside it.

The personal allowance taper takes away £1 of allowance for every £2 of adjusted net income above £100,000. The allowance is gone at £125,140. In between, each extra pound of bonus costs 40% plus the tax on the lost allowance: 60% of income tax, 62% with NI.

A £10,000 bonus on a £100,000 salary shows the effect. PAYE takes £4,000.00 on the payslip, because the code still grants the full allowance, yet the year's tax rises by £6,000.00. The £2,000.00 shortfall appears as a negative timing row: tax still to pay, usually collected through a changed code or Self Assessment.

The same rise in adjusted net income can bring in the High Income Child Benefit Charge where Child Benefit is claimed; the estimate leaves that charge out. A bonus given up for an employer pension contribution never becomes taxable pay, so it does not count towards the taper.

Student loan repayments are worked out per pay period, so a bonus month repays more than a normal one. Plans take 9% of pay above the period threshold and the postgraduate loan 6%, rounded down to the whole pound (HMRC SL3 deduction tables).

On the default bonus, a Plan 2 loan takes a further £180.00 and a postgraduate loan £120.00.

A bonus sacrifice gives up some or all of a bonus before it is paid, in exchange for an employer contribution to a workplace pension. Since the cash is given up before it is received, that part carries no Income Tax and no employee NI. Sacrificing £1,000.00 of the default bonus leaves £720.00 in cash after £200.00 of tax.

From 6 April 2029, the National Insurance Contributions (Employer Pensions Contributions) Act 2026 charges contributions on salary sacrifice above a yearly limit, which the first regulations set at £2,000. Nothing changes for 2026/27. The salary calculator covers regular salary sacrifice and other pension methods over a whole year.

No law gives UK employees a bonus, so whether a joiner or leaver gets a share depends on the scheme (Acas). A contractual bonus must be paid when its conditions are met. A discretionary bonus is at the employer's choice, although a long custom and practice of paying it can turn it into a right.

Many schemes require the employee to be in work, and not under notice, on the payment date. A share for part of the year is due only if the scheme says so. Part-time staff usually receive the same bonus pro rata to their hours: in the Acas example, a full-time bonus of £500 becomes £250 at half the hours.

To model a share, choose pro rata and enter the months worked out of twelve. Six months of the default bonus gives £1,000.00 before deductions and £720.00 after them. A contractual bonus that goes unpaid can be claimed as an unlawful deduction from wages or as a breach of contract.

Yes, when it is paid in money: a Christmas bonus in cash or in cash vouchers is earnings, taxed through PAYE with contributions like any other bonus. Many are paid in December, the month the default example uses.

Two exemptions cover gifts rather than pay. Trivial benefits are small non-cash gifts costing £50 or less each (GOV.UK, trivial benefits), such as a Christmas present or a store gift voucher that cannot be swapped for cash. They must not reward work or be promised in the contract. Cash never qualifies, however small.

An annual staff party is tax free when it is open to staff generally and its cost per head, VAT included, is £150 or less. That figure is not an allowance: above it, the whole cost per head becomes taxable, not just the excess.