You've earned a bonus. Congratulations. Now the unwelcome reality: bonuses are taxed as regular income — and because they're added to your salary in a single month, they can temporarily push you into a higher tax bracket, making the net amount look smaller than expected.
How Bonus Tax Actually Works
Your monthly salary is taxed using a cumulative approach — your employer estimates your full year's earnings and divides the tax evenly. When a bonus lands in one month, that month's payroll software often calculates tax as if you earn that high salary every month. This causes higher tax in the bonus month that self-corrects in subsequent months — though it can be jarring.
How Much Do You Keep? (2026/27)
| Bonus Amount | If Basic Rate (20%) | If Higher Rate (40%) |
|---|---|---|
| £1,000 | ~£720 net | ~£580 net |
| £2,500 | ~£1,800 net | ~£1,450 net |
| £5,000 | ~£3,600 net | ~£2,900 net |
| £10,000 | ~£7,200 net | ~£5,800 net |
| £25,000 | ~£18,000 net | ~£14,500 net |
Estimates include 8%/2% NI. Net figure assumes bonus doesn't cross a new tax threshold.
The Threshold Risk
If your regular salary is £48,000 and you receive a £5,000 bonus, your total for the month is £53,000 annualised — above the £50,270 Higher Rate threshold. The portion above the threshold is taxed at 40% rather than 20%. The combined effect reduces your bonus take-home more than you might expect.
Bonus Sacrifice: The Smarter Alternative
If your employer allows it, directing your entire bonus into your pension via salary sacrifice is extremely tax-efficient. A £10,000 bonus sacrificed into pension:
- Saves you 20–40% income tax on the bonus
- Saves you 8% employee NI
- Saves your employer 13.8% employer NI (sometimes returned to you as extra pension)
- Increases your pension pot by £10,000 gross
Frequently Asked Questions
Is the April bonus trick real?
Yes — timing your bonus into the early months of a new tax year means you start with a fresh cumulative calculation. This can reduce the "spike" effect, though the total annual tax is the same. Some employers do offer flexibility on bonus payment dates.
Why was my bonus taxed at what felt like 60%?
If you're between £100,000 and £125,140, you're in the Personal Allowance taper zone where the effective marginal rate is 60%. A bonus pushing you into this zone can feel like an enormous tax hit. Bonus sacrifice is particularly valuable here.
Calculate exactly how much of your bonus you'll keep using our Bonus Tax Calculator.