How Much Bonus Will I Actually Keep? (Tax, NI and Pension)

Your bonus is taxed as regular income using PAYE: 0% on first £12,570, 20% on £12,571-£50,270, 40% on £50,271-£125,140, 45% on £125,140+. Plus National Insurance: 10% on £12,571-£50,270, 2% above £50,270. Student loans add 9% (Plan 2) or 6% (Plan 1). Example: £30k salary + £5k bonus = tax on higher rate portion. Most importantly: if your total income crosses £100,000, you enter the 60% tax trap where you lose your personal allowance gradually. Use our bonus calculator to see your exact take-home.

Between £100,000-£125,140, you lose £1 of personal allowance for every £2 earned. This creates an effective 60% tax rate (40% income tax on the bonus + 40% tax on the lost personal allowance). Example: £110k salary + £20k bonus puts you deep in trap. That £20k bonus costs you: £8,000 income tax (40%), £4,800 lost allowance tax (24%), £400 NI (2%), £1,800 student loan (9%) = £15,000 tax = 75% effective rate with student loan. This is the highest marginal tax rate in the UK. Solution: pension contributions escape this trap.

Yes, bonuses are subject to National Insurance: Class 1 Employee NI at 10% on earnings between £12,570-£50,270, then 2% on everything above £50,270. Your employer also pays 13.8% Employer NI (which you don't see). Unlike pension contributions (NI free), there's no way to reduce NI on bonuses through salary sacrifice. If your salary already exceeds £50,270, your entire bonus is taxed at just 2% NI - small consolation when you're paying 40-60% income tax.

If you're a higher-rate taxpayer (earning over £50,270): 40% income tax = £2,000, 2% National Insurance = £100, 9% Student Loan (Plan 2) = £450. Total deductions: £2,550 = take-home £2,450 (49% lost). This assumes you're already above the NI threshold. If you're a basic-rate taxpayer: 20% tax + 10% NI + 9% student loan = 39% deduction = £3,050 take-home. The calculation depends on your salary - use a bonus calculator to see your specific rate.

Yes! Salary sacrifice into pension before bonus is paid is the most tax-efficient option: £10k bonus → £10k pension = full £10k contributed (no tax, no NI). Your employer might even add their saved NI (£1,380). If you're in the 60% trap (£100-125k), £10k bonus becomes £4k take-home but £10k pension = 2.5x more value. You can contribute up to 100% of earnings or £60,000/year (whichever lower). Downsides: locked until age 57 (rising to 58 in 2028), 25% tax-free withdrawal, 75% taxed at retirement rate. Only works if arranged before bonus paid.

No. Bonus tax uses the same rates as salary - there's no 'bonus tax rate.' However, bonuses can push you into higher tax bands mid-year, causing temporary higher deductions. HR systems often over-withhold tax on bonuses (assuming you'll earn that every month and annualizing it), which you reclaim via tax return or adjusted later in tax year. Example: £30k salary normally in basic rate (20%). £20k bonus in December gets taxed as if you earn £50k/month (£600k/year), applying 40-45% tax. This corrects in subsequent months or you reclaim via self-assessment. The annual total tax is correct - just the timing is off.

Salary increase is usually better: Permanent income increase (compounds future raises), Better mortgage applications (bonuses often discounted 50%), Student loan thresholds recalculated April each year (bonus in March triggers payment, in April might not), Better redundancy pay (based on salary not bonuses), Better pension contributions if percentage-based. Bonus is better if: You want lump sum for specific goal (house deposit, debt payoff), Your employer does profit share (tax treatment same as salary), You're close to pension annual allowance (salary sacrifice exhausted, bonus taken as cash). General rule: £5k salary rise beats £6k annual bonus for most people.

The annual tax is the same, but PAYE withholding might differ. Regular monthly bonuses: PAYE spreads tax across year more smoothly. One-off annual bonus: Often over-withheld (HMRC assumes you'll keep earning that rate), creating temporary cash flow hit, then refunded later. Many employees see 40-45% deductions on December bonus even at 20% overall rate. You're not paying more tax annually - just earlier. This resolves through: Self-assessment refund (next January), Automatic PAYE adjustment (next tax year), Changing tax code with HMRC. The final tax bill is identical to if you'd been paid monthly.

Use our free bonus calculator - but to calculate manually: 1) Add bonus to annual salary to find total income, 2) Calculate tax: first £12,570 = 0%, £12,571-50,270 = 20%, £50,271-£125,140 = 40% (watch for 60% trap £100-125k), £125,140+ = 45%, 3) Calculate NI: £12,571-50,270 = 10%, £50,270+ = 2%, 4) Deduct student loan if applicable: 9% (Plan 2) or 6% (Plan 1) above threshold, 5) Subtract existing salary deductions from total to find bonus take-home. It's complicated - easier to use calculator at /tools/bonus-takehome-calculator.

Add your total annual salary plus the lump sum to find your total taxable income. Then calculate: 0% on the first £12,570, 20% on £12,571-£50,270, 40% on £50,271-£125,140, 45% above £125,140. Apply National Insurance at 10% (£12,571-£50,270) or 2% (above £50,270). Deduct 9% for Plan 2 student loan above the £27,295 threshold. The bonus portion is taxed at your highest marginal rate. Use our bonus calculator for instant results.

Your bonus could push you into a higher bracket, but you only pay the higher rate on the portion above the threshold - not your entire income. For example, if you earn £45,000 and receive a £10,000 bonus (total £55,000), you'll pay 20% tax on the first £5,270 of the bonus (up to the £50,270 higher-rate threshold), then 40% on the remaining £4,730. The misconception that 'bonuses are taxed more' comes from PAYE systems over-withholding, which normalises over subsequent months.

Yes. Student loan repayments are calculated on your total income above your plan's threshold. Plan 2: 9% above £27,295/year. Plan 1: 9% above £24,990/year. Plan 4: 9% above £31,395/year. Plan 5: 9% above £25,000/year. Postgraduate loan: 6% above £21,000/year. A £10,000 bonus on top of a £35,000 salary (Plan 2) adds £900 to your student loan repayment. Student loans can take your effective marginal tax rate above 50% when combined with income tax and NI.