Bonus Tax 2026/27: PAYE and National Insurance

There is no separate UK bonus tax rate. A cash bonus is normally added to your employment earnings and processed through payroll. Your employer deducts PAYE Income Tax and, where applicable, employee Class 1 National Insurance from the combined pay for the relevant payroll period. The amount taken from one payslip can look unusually high because payroll is estimating your annual position from that pay period; it does not mean every bonus is automatically taxed at a special flat rate.

This guide covers ordinary cash bonuses in the UK 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027. It also explains why the result can differ for a non-cash award, a bonus paid after you leave, Scotland, or a bonus that takes your adjusted net income above £100,000. Use the Salary Calculator→ to compare the gross and net result with your normal pay.

How a cash bonus is taxed

HMRC says a cash bonus, including a voucher that can be exchanged for cash, counts as earnings. The employer adds it to the employee's other earnings and operates PAYE tax and Class 1 National Insurance through payroll. The employer also pays any employer National Insurance due; that employer cost is separate from the deductions shown on your payslip.

For most employees in England, Wales and Northern Ireland with a standard Personal Allowance, the 2026/27 Income Tax bands are 20% basic rate, 40% higher rate and 45% additional rate. The standard Personal Allowance is £12,570, but it is reduced by £1 for every £2 of adjusted net income above £100,000 and reaches zero at £125,140. A bonus can therefore affect both the tax on the bonus and the allowance available against other income.

Scotland has separate Income Tax bands. A Scottish taxpayer can see a different deduction from an employee elsewhere in the UK even when the gross salary and bonus are identical. Your tax code and residence position matter more than the label used by the employer for the payment.

Why a bonus payslip can show a high deduction

Payroll normally calculates PAYE using the tax code and earnings period in which the bonus is paid. If a monthly employee receives a large bonus in one month, the payroll calculation can project higher earnings for the year or use the cumulative information available at that point. The payslip may therefore show a larger Income Tax deduction than the percentage you expected from dividing tax by the bonus alone.

National Insurance is also assessed using the relevant earnings period and the employee's category letter. For category A in 2026/27, the main employee rate is 8% on earnings above the Primary Threshold up to the Upper Earnings Limit and 2% above that limit. A bonus can push earnings through one or more thresholds in that pay period. The actual deduction depends on the pay frequency, previous earnings in the relevant period, category letter and any deferment or reduced-rate circumstances.

Do not describe the whole bonus as “40% tax” or “8% NI” without checking the bands. Income Tax and National Insurance use different thresholds and are calculated separately.

Worked example: why the net bonus is not a fixed percentage

Suppose an employee in England receives a £5,000 cash bonus with their monthly salary. The employer adds the £5,000 to the taxable pay for that payroll run and applies the employee's tax code and the 2026/27 payroll rules. Some of the payment may fall into a basic-rate band, some may fall into a higher-rate band, and the bonus may create additional employee National Insurance in that period.

The employee's exact net amount cannot be calculated from the bonus alone. It depends on annual salary, year-to-date pay, tax code, pay frequency, pension deductions, student loan plan, National Insurance category and whether the employee is Scottish. A take-home result from a generic “bonus tax percentage” is therefore only a rough illustration. Enter the full salary and bonus in the Salary Calculator→ and check the payslip against the employer's payroll calculation.

Cash, vouchers and non-cash awards

Cash bonuses and vouchers exchangeable for cash are the straightforward case: they are earnings and normally go through PAYE and Class 1 National Insurance. A non-cash award does not automatically follow the same route. HMRC says the reporting and payment treatment depends on the item. For example, a benefit that can readily be converted to cash may need PAYE treatment, while other benefits can fall under different reporting or National Insurance rules.

Ask the employer what the award is legally and payroll-wise before assuming that a gift, share award, voucher or product has the same treatment as cash. An award described informally as a “bonus” can be a benefit in kind, a readily convertible asset, employment-related securities or another type of payment with its own HMRC rules.

Bonuses paid after leaving a job

An expected bonus paid after an employee leaves is not automatically free of payroll deductions. HMRC's employer guide distinguishes regular payments after leaving, such as an expected bonus, from irregular payments such as an unexpected bonus or arrears of pay. The earnings period and National Insurance calculation can differ depending on the type of payment, the date it is made and whether the employee has left the contract.

The tax treatment can also differ for a termination award. A genuine termination payment is not the same thing as an ordinary performance bonus, and the £30,000 termination-payment rules should not be applied to a normal bonus just because it is paid on the final payslip. Use the Termination Payments guide when the payment relates to the end of employment, and ask payroll to identify each component separately.

Tax codes, refunds and underpayments

If your tax code is wrong, a bonus does not itself fix the underlying record. Check the tax code on the payslip and compare the pay and tax figures with HMRC's online Income Tax service. A later code change can adjust deductions in future payroll runs. If too much tax was deducted by the end of the tax year, HMRC may issue a refund or the employee may need to claim, depending on the circumstances. If too little was deducted, HMRC may collect the shortfall through a revised code or Self Assessment.

Keep the payslip, bonus letter, P60 and any corrected payroll statement. They show whether the payment was cash earnings, a benefit, a termination amount or a separate share-related award. That classification is more useful than the word “bonus” on its own.

Bonus sacrifice and pension contributions

A request to put a bonus into a pension is not automatically a tax-free cash-bonus election. Salary sacrifice is a contractual change to pay and normally needs to be agreed before the relevant entitlement or payment under the employer's scheme. A personal pension contribution has a different relief mechanism from an employer contribution, and an employer may have separate rules for bonus sacrifice, timing and National Insurance sharing.

Before making an election, check the pension annual allowance, carry-forward, scheme processing date and whether the contribution is based on gross bonus or post-tax cash. Include employer contributions and any defined-benefit input in the review. A contribution can reduce adjusted net income in some circumstances, but it does not remove every pension or payroll limit. Keep the election and confirmation from payroll or the pension provider.

Bonus clawbacks and repayment

A performance bonus may be repayable if the employee leaves, a target is later restated or a malus or clawback clause applies. A repayment is not simply the reverse of the original net payment. Keep the award letter, clawback decision, bank transfer and payroll correspondence and ask the employer how the correction will be reported. The tax result can depend on whether the original amount was cash earnings, a benefit, shares or a termination-related payment and on the year in which the repayment occurs.

Do not repay an amount informally while leaving the original payslip unchanged. The employee should understand whether the employer will amend payroll, issue corrected information or direct the employee to HMRC's relief route. The employer should retain a clear audit trail rather than deleting the original bonus from the ledger.

Employer payroll review

Before processing a bonus, the employer should record the award type, payment date, tax year, employee status, tax code, National Insurance category, pension instruction and any student-loan or attachment-of-earnings deductions handled through payroll. A non-cash or share award must be classified before selecting the payroll and reporting route. A payment after leaving should be checked against HMRC's rules for regular and irregular post-employment payments.

After the payroll run, reconcile gross pay, PAYE, employee and employer National Insurance, pension amounts, year-to-date totals and the payment file. If a correction is needed, tell the employee what changed and keep the original and amended records. A bonus paid near 5 April should be checked carefully because the tax year follows the payroll payment date and the employer's reporting record.

Planning the household effect

Treat a discretionary bonus as uncertain until the employer confirms it. For planning, show the gross award, estimated PAYE, employee National Insurance, pension contribution, student loan deduction and net cash separately. Do not use a one-off net payment to justify a permanent monthly expense unless the income is contractual and recurring. Re-run the estimate if the bonus crosses a tax year, the tax code changes, the employee moves to Scotland or adjusted net income approaches the Personal Allowance taper.

Frequently Asked Questions

For a personalised estimate, enter your annual salary and bonus in the Salary Calculator→. For a different type of reward, compare this guide with the Salary Sacrifice guide or the Termination Payments guide and check the official HMRC source for the payment category.

Official sources

• GOV.UK: Expenses and benefits — bonuses
• HMRC: 2026 to 2027 employer guide to PAYE and National Insurance
• GOV.UK: Rates and thresholds for employers 2026 to 2027
• GOV.UK: Income Tax rates and Personal Allowances
• GOV.UK: National Insurance rates and categories

These GOV.UK and HMRC pages are the official references for bonus reporting, PAYE, National Insurance and the 2026/27 rates. Check the current payroll guidance before relying on an estimate.