Set up to 5 tiers. Each tier applies only to sales within that band.
Know the commission amount and rate? Find the original sale value.
Uses 2025/26 PAYE rates. Commission is taxed at your marginal rate.
Sales commission is a performance-based pay structure where a salesperson earns a percentage of the revenue they generate. Commission arrangements are widespread across industries including financial services, property, insurance, technology sales, and automotive retail. In the UK, commission can form a small supplement to a base salary or, in some roles, represent the entirety of a salesperson's earnings.
The fundamental commission calculation is straightforward: multiply the sale value by the agreed commission rate. A £50,000 deal at 5% generates £2,500 in commission. However, real-world commission structures are rarely this simple. Most organisations use tiered structures, draw arrangements, or team-based pools that require more careful calculation.
The simplest form: a fixed percentage applied to all sales regardless of volume. A recruiter earning 15% on all placements or a mortgage broker taking 0.35% of every loan arranged uses a straight commission model. This is transparent and easy to calculate but provides no special incentive to push beyond a comfortable level of sales.
Different rates apply to different bands of sales. The key principle is that each rate applies only to the sales within that specific band, not to total sales. For example: 5% on the first £10,000; 8% on sales between £10,001 and £30,000; 12% on anything above £30,000. If a salesperson achieves £35,000 in monthly sales, they earn: (£10,000 x 5%) + (£20,000 x 8%) + (£5,000 x 12%) = £500 + £1,600 + £600 = £2,700. The effective rate is 7.71%.
Common in new roles or during slow periods, a draw is an advance payment against future commission. If a salesperson receives a £2,000 monthly draw and earns £3,500 in commission, they keep £1,500 (the draw is repaid first). Non-recoverable draws function more like a guaranteed minimum salary. Recoverable draws create a debt if commission earnings never catch up, which has led to legal disputes in the UK.
Common in insurance, financial services, and SaaS sales, residual commission pays ongoing percentages as long as the client remains active. A financial adviser who placed a client into a pension scheme may receive trail commission of 0.5% per year on the fund value. Note: trail commission on investment products was banned under the Retail Distribution Review (RDR) in 2013; independent advisers must charge fees directly.
Some organisations pool commission across a sales team or region and share based on contribution. This encourages collaboration but can reduce individual motivation. Revenue share arrangements are common in partnerships and affiliate marketing.
Estate agent commission is one of the most significant commission transactions most UK residents will encounter. Rates vary considerably:
| Agency Type | Typical Rate | On £350,000 | + VAT (20%) |
|---|---|---|---|
| Sole agency (budget) | 0.9% – 1.1% | £3,150 – £3,850 | £3,780 – £4,620 |
| Sole agency (standard) | 1.2% – 1.5% | £4,200 – £5,250 | £5,040 – £6,300 |
| Multi-agency | 2.0% – 3.5% | £7,000 – £12,250 | £8,400 – £14,700 |
| Online / hybrid (fixed) | £999 – £1,499 | £999 – £1,499 | £1,199 – £1,799 |
Under the Estate Agents Act 1979, agents must disclose their fees in writing before accepting instructions. The Consumer Rights Act 2015 requires lettings agents to publish their fees publicly. Any undisclosed commission or secret profit is illegal. If an estate agent receives a referral payment from a solicitor, surveyor or mortgage broker, this must be disclosed to the seller.
The Retail Distribution Review (RDR), which came into force on 31 December 2012, fundamentally changed how financial advisers are remunerated. Independent Financial Advisers (IFAs) are now prohibited from receiving commission on investment products (including ISAs, pensions, and unit trusts). Instead, they must charge explicit fees. This has improved transparency and reduced mis-selling incentives.
Mortgage brokers may still receive procuration fees (proc fees) from lenders. A typical proc fee is 0.35% to 0.5% of the mortgage loan value. On a £200,000 mortgage, this equates to £700 to £1,000. Brokers must disclose this payment to clients. Some brokers also charge the client a direct broker fee of £300 to £500 on top.
General insurance products (home, car, travel) can still pay commission to intermediaries. This is disclosed in the product information documents.
Residential letting agents typically charge landlords for two main services. Tenant-find-only services cost 8% to 12% of the first year's rent. Full management services (where the agent handles maintenance, rent collection, and tenant issues) cost 10% to 15% of the monthly rent plus VAT. Since the Tenant Fees Act 2019, agents can no longer charge tenants most fees; the burden has shifted to landlords.
OTE is the total compensation a salesperson can expect to receive if they achieve 100% of their quota. OTE = Base Salary + Commission at 100% Target. If a role is advertised as £28,000 basic with £42,000 OTE, the commission element at full target is £14,000. OTE is not guaranteed: if you achieve only 70% of target, you typically earn 70% of the commission element, giving total earnings of £28,000 + (£14,000 x 0.7) = £37,800.
Some plans use accelerators: achieving over 100% of target earns commission at an enhanced rate. A salesperson at 120% of target might earn 130% of their plan commission due to the accelerator. This is designed to maximise incentive for the highest performers.
For employed salespeople, commission is treated as earnings under PAYE and is subject to Income Tax and National Insurance at the same rates as salary. The key consideration is your marginal rate. If your base salary already takes you to the higher rate threshold (£50,270 in 2025/26), all commission earned above this point will be taxed at 40% Income Tax plus 2% employee NI.
Self-employed commission agents pay Income Tax through Self Assessment. They can deduct allowable business expenses (car mileage, phone, home office costs) before calculating their taxable profit. National Insurance is paid as Class 4 contributions (9% on profits between £12,570 and £50,270; 2% above).
Your right to commission depends on your contract of employment. Commission terms should be clearly documented: the formula, payment timing, what happens to commission if a client cancels, and whether commission is earned at point of sale or payment. If commission forms a significant part of your remuneration, your employer cannot simply remove it without agreement; doing so may constitute a breach of contract or an unlawful deduction from wages under the Employment Rights Act 1996.
Commission must be taken into account when calculating statutory payments including holiday pay. Following a series of Employment Tribunal and Court of Justice rulings (including Lock v British Gas), employers must include regular commission in holiday pay calculations. Workers cannot be deterred from taking annual leave due to lost commission earnings.