Is a bonus taxed at 40%? What you actually keep
The short answer: a bonus is taxed at your highest rate, but only on the slice of income above each threshold. If your salary plus bonus stays under £50,270 the bonus loses 28p in the pound (20% tax plus 8% National Insurance). Above that line it loses 42p.
What a £5,000 bonus leaves you with
| Salary | Tax | NI | You keep | % kept |
|---|---|---|---|---|
| £30,000 | £1,000 | £201 | £3,799 | 76% |
| £48,000 | £1,546 | £111 | £3,343 | 67% |
| £55,000 | £2,000 | £100 | £2,900 | 58% |
| £80,000 | £2,000 | £100 | £2,900 | 58% |
At £30,000 the whole bonus is taxed at 20%. At £48,000 part of it crosses £50,270, so you get a mix. At £55,000 and above every pound is at 40%.
Why the payslip looks worse than the year
Income tax is cumulative: payroll tracks your year to date, so a bonus doesn’t push you into a different rate for the rest of the year, it just adds to the total. National Insurance is different. It is worked out each month on its own, so a large bonus can push that month above the monthly limit and look heavily charged. Nothing is taken that wouldn’t be taken if the money were spread across the year.
How to keep more of it
- Pension: sacrifice some of the bonus into your pension. It avoids income tax and National Insurance and can drop you below the 40% line. See the pension calculator.
- Timing: if your employer allows, the tax year in which the bonus is paid matters only if your income differs sharply between years.
- Check your code: a wrong tax code can cause extra tax. See tax codes explained.
Over £100,000 the allowance shrinks too, so the bonus costs even more: see the 60% tax trap.
A bonus that straddles the line
On a £48,000 salary the room left in the basic-rate band is £2,270. A £5,000 bonus therefore splits: £2,270 at 20% and £2,730 at 40%. The tax is £1,546. The highest rate applies only to the top slice.
Cash or pension: a comparison
On a £55,000 salary, a £5,000 cash bonus leaves £2,900. Paying the whole £5,000 into your pension through salary sacrifice puts the full £5,000 into your pot, because no tax or National Insurance is taken first. You can’t touch pension money until minimum pension age, so the right choice depends on whether you need the cash now. Check how it would grow in the pension calculator.
What if I’m told the bonus is “net”?
A net bonus is the amount you receive after tax. To pay it, your employer has to pay more gross. In the 40% band with 2% National Insurance, a £1,000 net bonus costs about £1,724 gross, and the employer may also pay employer National Insurance on top.
Other things a bonus can affect
- Student loan: repayments are 9% above the plan threshold, taken in the bonus month as well.
- Over £100,000: a bonus that takes you past this loses you part of the personal allowance. See the 60% tax trap.
- Child Benefit: a bonus can push one earner past the high-income charge threshold.
- Commission, back pay and one-off awards: these are taxed in exactly the same way as a bonus.
This is general information, not tax advice. Figures are for 2026/27 in England, Wales and Northern Ireland. Scotland has different rates.
Sources
Common questions
Is a bonus taxed at 40%?
Only the part of your total income above £50,270 is taxed at 40%. A bonus that keeps you under that line is taxed at 20%. A bonus that straddles it is part 20% and part 40%.
Why does my bonus payslip look taxed so heavily?
Payroll adds the bonus to that month's pay, and National Insurance is worked out on that single month, so it can look higher. Income tax is cumulative and evens out over the year.
Do I pay National Insurance on a bonus?
Yes. Employee National Insurance applies to bonuses at 8% up to the upper limit and 2% above it.
Can I reduce tax on a bonus?
Yes. Asking your employer to pay some or all of the bonus into your pension through salary sacrifice avoids income tax and employee National Insurance on that amount, and can bring you back under the 40% threshold.
Will I get any of the extra tax back?
Not usually, because the tax is correct for your income. If you were overtaxed because of the wrong tax code, HMRC can refund it.