A bonus is taxed as employment income under PAYE, exactly like your salary. Your employer adds the bonus to your pay in the period it is paid and deducts income tax at your marginal rate (20%, 40%, or 45% in England — up to 48% in Scotland) plus employee National Insurance at 8% up to £50,270 and 2% above. There is no special reduced rate for bonuses. The more of your personal allowance and basic rate band is already used by your salary, the more of your bonus will be taxed at the higher rate.
Yes, if your employer offers a bonus sacrifice arrangement you can redirect your bonus directly into your workplace pension before PAYE is applied. The bonus never appears on your payslip as earnings, so no income tax or National Insurance is deducted. This is entirely legal under HMRC rules. The full gross amount lands in your pension fund. Even if your employer does not offer salary sacrifice, you can make a personal pension contribution from your net bonus and claim income tax relief at source — though NI cannot be reclaimed this way.
Your salary uses up your personal allowance (£12,570) and potentially most of the basic rate band (£12,571–£50,270). So when your bonus arrives, it is taxed at your marginal rate — which may be 40% or even 45% rather than 20%. Additionally, if your employer used an emergency tax code (W1/M1) for the bonus payment, you may have been taxed on a non-cumulative basis, which can cause over-deduction. Check your payslip for the tax code used. If it shows W1 or M1, contact HMRC or your payroll department.
For most employees, a bonus paid through PAYE is already accounted for in the tax deducted at source, and you do not need to declare it separately on a self-assessment return. However, if your total income (including the bonus) exceeds £100,000, you must file a self-assessment return because the personal allowance tapers away above this threshold (losing £1 of allowance for every £2 over £100,000). HMRC may also send you a P800 notice if the PAYE calculation does not match expectations. You should also file if you have multiple income sources or receive untaxed investment income.
Emergency tax on a bonus typically arises when your employer uses a non-cumulative tax code (W1/M1), treating your bonus month as if it were the first month of the tax year. This means only 1/12th of your annual personal allowance (£1,047.50) is applied in that month, making large portions of the bonus taxable at higher rates than they should be. To recover overpaid tax: (1) contact HMRC to request your tax code is updated; (2) your employer can then refund the overpaid tax through payroll; (3) alternatively, after 5 April HMRC will issue a P800 and refund automatically or you can reclaim via your personal tax account at gov.uk.
Use our calculator above for an instant answer. Manually: (1) Add your annual salary and bonus together. (2) Calculate income tax on the combined total using the 2025/26 bands (0%, 20%, 40%, 45%). (3) Subtract the income tax you would pay on your salary alone. The difference is the income tax attributable to your bonus. (4) Calculate NI on the bonus: 8% on the portion of the bonus that falls within £12,570–£50,270, and 2% on anything above. (5) Subtract income tax and NI from the gross bonus. (6) If you have a pension sacrifice, deduct that first, then apply tax rates to the reduced amount.