1. Annual Salary: Enter your base salary before the bonus. This determines your tax band (Basic, Higher, or Additional rate).
2. Bonus Amount: Enter the gross bonus amount you expect to receive.
3. Student Loan: Select your plan if applicable, as student loan repayments are deducted from bonuses.
4. Month 1 Tax: Check the "Show Month 1 Impact" box to see if you might be temporarily overtaxed in the month you get paid.
Interactive Bonus Calculator
You Take Home
That's 58.8% of your bonus
Check this if you're worried about being overtaxed temporarily in the month you receive the bonus.
Why Is My Bonus Taxed So Heavily?
It's a common shock: you get a £1,000 bonus, but only see £500 (or less) land in your bank account. This happens for two main reasons:
- Marginal Tax Rate: Your bonus sits on top of your regular salary. If your salary uses up your Personal Allowance and Basic Rate band, your entire bonus might be taxed at 40% or even 45%.
- The "Month 1" Trap: Payroll systems often treat a one-off bonus as if you're going to earn that amount every month for the rest of the year. This projects your annual income to be much higher than it really is, triggering higher tax deductions for that month.
Don't Panic: The "Month 1" overpayment is temporary.
If you overpay tax because of a bonus spike, HMRC usually corrects this automatically. You'll either pay less tax in subsequent months (if on a cumulative tax code) or get a refund at the end of the tax year.
The "Sweet Spot": National Insurance
There is one silver lining for higher earners. National Insurance (NI) drops from 8% to 2% for earnings above £4,189 per month (approx £50,270/year).
If your regular salary is already above this threshold, your bonus will only attract 2% NI, compared to the 8% paid by basic rate taxpayers. This slightly offsets the higher income tax rate.
Starting a New Job?
When you start a new job, your new employer might not have your P45 details immediately. This forces them to put you on an Emergency Tax Code (often ending in 'M1' or 'W1').
This works exactly like the bonus trap: HMRC treats your first month's pay as if you'll earn that amount every single month, ignoring your unused Personal Allowance from earlier in the year.
How to Fix It
Ensure you give your new employer your P45 from your old job immediately. If you don't have one, complete the Starter Checklist (formerly P46) so they can assign the correct tax code.
Smart Move: Salary Sacrifice
Keep 100% of Your Bonus
Instead of taking the cash and losing 40-50% to tax, ask your employer to pay your bonus directly into your pension via Salary Sacrifice.
Take Cash Option
£580
(£1,000 bonus after 40% Tax + 2% NI)
Pension Option
£1,000
(Full amount invested for your future)
*Example for a Higher Rate taxpayer. You save Income Tax AND National Insurance.
Common Questions
Will I get the overpaid tax back?
Yes. If you're on a cumulative tax code (like 1257L), it usually corrects automatically in your next payslip. If not, you can claim a refund via HMRC after the tax year ends.
Does my bonus affect Student Loan?
Yes. Student loan repayments are calculated on your total income per pay period. A large bonus will trigger a larger deduction (9% of everything above the threshold).