Question 1

How is my bonus taxed in the UK?

Accepted Answer

Your bonus is taxed as part of your total income for the year. It's added to your base salary and taxed at your marginal rate — 20% basic rate, 40% higher rate, or 45% additional rate — plus National Insurance at 8% (or 2% above the Upper Earnings Limit).

Question 2

Why does my bonus seem to be taxed at a higher rate than my salary?

Accepted Answer

Your Personal Allowance and lower tax bands are already used by your regular salary. Your bonus is taxed at your marginal rate — the rate on your next pound of income — which is often higher than your average rate.

Question 3

Can I reduce the tax on my bonus?

Accepted Answer

Yes. Salary sacrifice pension contributions reduce your taxable income before tax and NI are calculated, saving both. You could ask your employer to pay part or all of your bonus into your pension via salary sacrifice.

Question 4

What is the 60% tax trap and does it affect my bonus?

Accepted Answer

If your total income (salary + bonus) is between £100,000 and £125,140, you lose £1 of Personal Allowance for every £2 earned. This creates an effective marginal rate of around 60%. Our calculator shows if your bonus pushes you into this zone.

Bonus Tax Calculator

Tax on Your Bonus

Before vs After Bonus