How are bonuses taxed in the UK?
A cash bonus is not subject to a special “bonus tax”. It is added to your employment earnings and processed through PAYE, so the amount you keep depends on where the extra income lands in your tax bands and on deductions such as National Insurance and student loans.
Why your bonus can look heavily taxed
Your normal salary may already have used your Personal Allowance and some or all of the basic-rate band. A bonus sits on top of that salary, so much of it can be taxed at your marginal rate rather than your average rate. PAYE is also calculated by pay period, which can make the deduction on a bonus payslip look different from the eventual full-year position.
What happens above £100,000?
Adjusted net income above £100,000 starts to withdraw the Personal Allowance by £1 for every £2. That creates the well-known high effective Income Tax rate on income in the taper zone. A bonus can push someone into that zone even when their base salary is below £100,000.
Use the calculator, not a flat percentage. The NetSlip Bonus Tax Calculator compares your annual position with and without the bonus, including selected pension and student-loan settings.
Are bonuses subject to National Insurance?
Cash bonuses count as earnings for Class 1 National Insurance. In 2026/27, most category A employees pay 8% between the Primary Threshold and Upper Earnings Limit and 2% above it. Because NI works by earnings period, the exact payslip result can depend on when and how the bonus is paid.
Can a bonus increase student-loan deductions?
Yes. Student-loan deductions through payroll are earnings-period based. A large bonus can therefore increase the deduction in the pay period in which it is paid if your earnings are above the relevant plan threshold.
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FAQs
Is a bonus taxed at 40% automatically?
No. A cash bonus is added to your other taxable employment income. The slice can fall into different Income Tax bands depending on your total income.
Do I pay National Insurance on a cash bonus?
Normally yes. Cash bonuses count as earnings for Class 1 National Insurance.
Can a bonus push me into the £100k tax trap?
Yes. A bonus can increase adjusted net income above £100,000, where the Personal Allowance begins to taper away.