Bonus Tax 2025-26: How Much of Your Bonus Will You Keep?
A bonus is treated as ordinary employment income for tax purposes. It is added to your salary and taxed at your marginal rate — the rate that applies at the top of your income. This means that if your salary puts you in the Basic Rate band (20%), your bonus is taxed at 20%. If your salary is above £50,270, your bonus is taxed at 40% from the first pound.
How much bonus tax do you pay? Key scenarios
| Base salary | Bonus | Tax on bonus (Income Tax) | NI on bonus (8%) | Bonus take-home |
|---|---|---|---|---|
| £25,000 | £2,000 | £400 (20%) | £160 | £1,440 |
| £30,000 | £5,000 | £1,000 (20%) | £400 | £3,600 |
| £40,000 | £5,000 | £1,000 (20%) | £400 | £3,600 |
| £48,000 | £5,000 | £894+£731 (band split) | £146+£254 | £2,975 |
| £55,000 | £5,000 | £2,000 (40%) | £100 | £2,900 |
| £80,000 | £10,000 | £4,000 (40%) | £200 | £5,800 |
| £100,000 | £10,000 | £4,000 (40%) | £200 | £5,800 |
The £100,000 bonus trap
If your salary is near £100,000, a bonus can trigger one of the most punishing effective tax rates in the UK. Earnings between £100,000 and £125,140 cause your Personal Allowance to be withdrawn at £1 for every £2 of income. This creates an effective 60% tax rate on income in this band:
- 40% income tax on the earnings themselves
- Plus 20% effective extra tax from losing the Personal Allowance
- Plus 2% NI
A £10,000 bonus on a £100,000 salary costs approximately £6,200 in tax — leaving just £3,800. The solution: pay the bonus directly into a pension to avoid the trap entirely.
How to reduce bonus tax with pension contributions
The most tax-efficient way to handle a bonus is to direct it into your pension via salary sacrifice. This reduces your taxable income, preserving your Personal Allowance and potentially keeping you in a lower tax band.
Example: £48,000 base salary + £5,000 bonus = £53,000 total. Without pension: the £2,730 above the Higher Rate threshold is taxed at 40%, costing extra tax. Sacrifice the full £5,000 bonus to pension: your taxable income stays at £48,000 — below the threshold — and you save approximately £731 in income tax.
Is my bonus taxed differently from my salary?
In terms of the rate applied, no. A bonus is employment income taxed at the same bands as salary. However, your employer may deduct tax on a cumulative basis (spreading the bonus over the year in PAYE terms) or on a Week 1/Month 1 basis, which can temporarily over-deduct. Any over-deduction is corrected through the normal PAYE reconciliation process.
Frequently asked questions
How much tax do I pay on a bonus?
Your bonus is taxed at your marginal Income Tax rate — 20% if your total income is below £50,270; 40% if above. You also pay 8% National Insurance on the bonus (2% if it pushes you above £50,270).
Can I avoid paying tax on my bonus?
You cannot avoid tax, but you can reduce it. Directing a bonus into your pension via salary sacrifice reduces your taxable income, potentially saving 20–40% of the bonus amount in income tax.
Why is my bonus taxed so heavily?
Bonuses are taxed at your highest marginal rate. If you are a Higher Rate taxpayer, 40% Income Tax plus 2% NI means you keep only 58p in every £1. And if you are between £100,000 and £125,140, the Personal Allowance withdrawal pushes the effective rate to over 62%.