Is overtime taxed more than normal pay?
The short answer: no. Overtime is taxed at the same rates as the rest of your pay. It only feels worse because it sits on top of your normal earnings, so it is taxed at your highest rate. On a £25,000 salary you keep about 72p of every overtime pound; above £50,270 it is about 58p.
What £2,000 of overtime leaves you with
| Salary | Tax | NI | You keep |
|---|---|---|---|
| £11,000 | £86 | £34 | £1,880 |
| £25,000 | £400 | £160 | £1,440 |
| £40,000 | £400 | £160 | £1,440 |
| £55,000 | £800 | £40 | £1,160 |
On an £11,000 salary only part of the overtime is above the £12,570 allowance, so you keep more. At £40,000 it is 20% tax plus 8% NI. At £55,000 it is 40% plus 2%.
Why it feels like more
- The extra pay is taxed first at your highest band, not the average.
- If one month is large, National Insurance for that month can look steep, though the year evens out.
- If your overtime is paid a month late, one payslip can look bigger than the next.
Is overtime still worth it?
Almost always. Even at 40% tax you still keep over half. Time and a half on a higher-rate salary still leaves you about 87p for every £1 of your normal hourly rate, and double time leaves you with more than your normal gross rate. Compare against taking time off in lieu instead. A pension contribution out of overtime can shield it from tax. See the same effect on bonuses.
What 10 hours of overtime pays at £15 an hour
| Overtime rate | Per hour | 10 hours | Keep at 20% + 8% NI | Keep at 40% + 2% NI |
|---|---|---|---|---|
| ×1.25 | £18.75 | £188 | £135 | £109 |
| ×1.5 | £22.50 | £225 | £162 | £131 |
| ×2 | £30.00 | £300 | £216 | £174 |
Overtime and holiday pay
If you work overtime regularly, it may need to be included when your holiday pay is calculated. If your payslip shows holiday pay at your basic rate only, ask your employer how it is worked out, and check ACAS guidance if the numbers look low.
Time off in lieu instead
Some employers offer time off rather than pay. That means no tax on the hours, but also no extra money. If you are a higher-rate taxpayer, the time can be worth more than the 58p in the pound you would keep, and on a low income the cash may be worth more than the time. The right choice depends on what you need.
Does overtime count for pension and student loan?
- Pension: it depends on your scheme. Auto-enrolment counts overtime as qualifying earnings, but some employer schemes use basic salary only.
- Student loan: overtime counts as pay, so the 9% above your plan threshold applies to it.
- Mortgage applications: lenders may count regular overtime only if you can show it over a year or more.
- Working time: the 48-hour average week limit still applies unless you have opted out.
This is general information, not tax advice. Figures are for 2026/27 in England, Wales and Northern Ireland.
Common questions
Is overtime taxed more than normal pay?
No. Overtime is taxed at exactly the same rates as your normal pay. It can feel higher because it is added on top, so it is taxed at your highest rate.
Why is my overtime taxed at 40%?
Only if your total income, including overtime, is above £50,270. Payroll taxes the part above that at 40%. Otherwise overtime is taxed at 20%.
Is overtime worth it if I'm a higher-rate taxpayer?
Usually yes, but you keep about 58p of each pound, since 40% goes in tax and 2% in National Insurance. Overtime paid at time and a half still leaves you better off than your normal rate.
Do I pay National Insurance on overtime?
Yes, at the same rates as normal pay: 8% above the threshold and 2% above the upper limit.
Does overtime affect my student loan?
Yes. Repayments are 9% of pay above the plan threshold, and overtime counts as pay.