Why Is My Bonus Taxed So Much?

Bonuses are taxed at your marginal rate – the highest rate of tax you pay based on your total income for the year. This means if your bonus pushes your total income into a higher tax band, the bonus portion is taxed at that higher rate.

Why bonuses seem more heavily taxed

Marginal tax rate

Your bonus is added on top of your existing salary, so it's taxed at your marginal rate (the rate you pay on the last pound you earn). If you're a basic rate taxpayer, your bonus is taxed at 20%. But if your bonus pushes your total income into the higher rate band, the portion of the bonus above the threshold is taxed at 40%.

Taxed in one pay period

Because bonuses are typically paid in a single pay period, all the tax on the bonus is deducted at once. This can make it seem like your bonus is taxed more heavily than your regular salary, but it's actually being taxed at the same rate that applies to your total income for the year.

Calculation method

Your employer may use a special calculation method for bonuses that can result in temporary over-taxation. This is usually corrected automatically in future pay periods, but it can make your tax appear very high in the month you receive the bonus.

Moving into a higher tax band

If your bonus is large enough to push you into a higher tax band, you'll pay tax at that higher rate on the portion of the bonus above the threshold. This is normal and expected, but it can make the bonus feel heavily taxed.

What you can do

Use our bonus tax calculator to see exactly how much tax you'll pay on your bonus based on your current salary and the bonus amount. This helps you understand what your take-home bonus will be before you receive it.

Remember that bonuses are taxed the same way as any other income – there's no special "bonus tax rate". The tax you pay on your bonus is based on your total income for the year, including the bonus itself.

If you think your bonus has been over-taxed, check your payslip carefully. Look at your gross pay (salary plus bonus), your tax deductions, and compare it to what you expect. If there's a significant discrepancy, it may be worth checking with your employer or HMRC, though temporary over-taxation often corrects itself automatically.

Related guides

For more information about UK tax and how bonuses are taxed, see our UK Tax Guide. If you're wondering why your overall tax seems high, read our guide on why your tax might be high.