Overtime Tax Calculator UK

How Is Overtime Taxed in the UK?

Overtime pay is taxed exactly the same as your regular salary - there's no special "overtime tax rate." However, overtime often feels more heavily taxed because:

• Your Personal Allowance is already used: Your £12,570 tax-free allowance is typically used by your regular salary
• Every pound of overtime is taxable: Unlike regular pay where part is tax-free, all overtime is subject to tax
• It may push you into a higher tax band: If overtime takes you over £50,270, the excess is taxed at 40%

How to Reduce Tax on Overtime

While you can't avoid tax on overtime, there are legitimate ways to reduce your overall tax bill:

Overtime Tax Rules: What HMRC Says

HMRC does not distinguish between regular pay and overtime pay for tax purposes. All employment income is aggregated and taxed according to the standard income tax bands. However, the way PAYE operates on a cumulative basis can create confusion about how much tax is deducted from overtime payments.

How PAYE Handles Overtime Month by Month

Under the cumulative PAYE system, your employer calculates your tax position from the start of the tax year. Each month, they work out the total tax due on all earnings so far, subtract tax already paid in previous months, and the remainder is what appears on your payslip. When you work overtime in a particular month, the additional earnings are added to your year-to-date total, and tax is calculated on the cumulative amount. This means:

• In months with high overtime, you may see a larger proportion of your pay going to tax
• In subsequent months with less overtime, your tax may be lower to compensate
• By the end of the tax year, you should have paid the correct total amount of tax

Emergency Tax on Overtime and Bonuses

Some employers process overtime or bonuses using a "non-cumulative" or "Month 1" tax code (shown as "X" on your payslip). This treats the payment as though it is your only income that month, which can result in overtaxation. If this happens, the excess tax should be corrected in subsequent pay periods or you can claim a refund from HMRC. Check your payslip for tax code suffixes and contact your payroll department if you notice the "M1" or "W1" indicator alongside unusually high deductions.

National Insurance on Overtime for 2025/26

Employee National Insurance is charged at 8% on earnings between £12,570 and £50,270 per year, and 2% on earnings above £50,270. Unlike income tax, NI is calculated on a per-pay-period basis rather than cumulatively. This means NI deductions on overtime are generally straightforward: if your regular plus overtime pay in a given period exceeds the weekly or monthly NI threshold, you will pay NI on the excess at the appropriate rate.

Employers also pay National Insurance on overtime at 15% on all earnings above £5,000 per year (the Secondary Threshold). This is an additional cost to the employer and is one reason some employers prefer to offer time off in lieu (TOIL) rather than paid overtime.

Overtime and Benefits Entitlement

Be aware that regular overtime earnings can affect your entitlement to certain benefits and tax credits. If overtime pushes your total income above specific thresholds, you may lose eligibility for Universal Credit (tapered at 55p for every £1 above your work allowance), Child Benefit (subject to the High Income Child Benefit Charge at £60,000), or the Marriage Allowance (the higher-earning partner must be a basic rate taxpayer). Factor these potential losses into your decision about whether overtime is financially worthwhile.