Bonus Tax Calculator

In the UK, a bonus is treated as employment income and taxed under PAYE at your marginal rate in the year of payment. Your employer deducts Income Tax (20% basic, 40% higher, or 45% additional rate) and National Insurance (8% up to £50,270, 2% above) from the bonus before paying it. The effective combined marginal rate on a bonus depends on where your total income sits after adding it: if the bonus keeps you within the basic rate band (up to £50,270) the combined IT + NI rate is 28%; in the higher rate band (£50,270 to £100,000) it is 42%; in the Personal Allowance taper zone (£100,000 to £125,140) the effective rate reaches approximately 62% due to loss of the Personal Allowance; and above £125,140 it is 47% (45% IT + 2% NI).

In Ireland, a bonus is treated as employment income and taxed under PAYE in the tax year it is received. Your employer deducts Income Tax (20% standard rate or 40% higher rate), USC, and PRSI (4.2% Class A) before paying the bonus. The combined marginal rate on your bonus depends on your total income: if the bonus keeps you within the standard rate cut-off (€44,000 for single, €53,000 for married one-income), the combined rate in that zone is approximately 23–27%; above the cut-off the rate is 40% IT + 3% USC + 4.2% PRSI = 47.2%; and above the USC 8% threshold of €70,044 the combined rate is 40% IT + 8% USC + 4.2% PRSI = 52.2%. Ireland does not have a separate PAYE 'bonus flat rate': the marginal rate on your last pound or euro of income always applies to the bonus.

Yes, a pension contribution is the most effective route. If your employer pays your bonus directly into a workplace pension (salary sacrifice or employer contribution), it bypasses Income Tax and National Insurance entirely, not just deferring them. At the higher rate, this turns a £10,000 bonus taxed at 42% (you receive £5,800) into a £10,000 pension contribution. The pension fund then grows tax-free. If you are between £100,000 and £125,140 and the bonus pushes you into the Personal Allowance taper zone, redirecting it to a pension restores your Personal Allowance and can reduce the effective rate from 62% to 20%. Charitable giving via Gift Aid also extends the higher rate threshold. Deferring cash bonuses into the following tax year rarely helps unless it moves you out of a threshold zone.

The most effective strategy is pension contributions. In Ireland, employer PRSA contributions are exempt from Income Tax, USC, and PRSI under the Finance Act 2024 changes. An employer paying your bonus into a PRSA instead of as cash avoids the 52.2% combined marginal rate at higher salary levels. Age-related limits apply: at 40–49 you can contribute up to 25% of remuneration; at 50–54, 30%; at 55–59, 35%; at 60+, 40%. Employee pension contributions reduce your Income Tax liability (but not USC or PRSI). Small Benefit Exemption allows employers to pay up to €1,500 per year in vouchers or non-cash benefits tax-free (up from €500 in 2024). Share options and profit-sharing schemes also have specific preferential tax treatments in Ireland.

At a base salary of £80,000, your bonus falls entirely within the 40% higher rate income tax band (you are already above the £50,270 threshold). National Insurance at this income level is 2% (above the Upper Earnings Limit). Combined, the marginal rate on your bonus is 42%. On a £10,000 gross bonus, you would receive approximately £5,800 after deductions (£4,200 to HMRC). Your effective take-home rate is 58%. If the bonus were large enough to push your income above £100,000, the portion above £100,000 would be taxed at approximately 62% due to Personal Allowance tapering.

At a base salary of €80,000 in Ireland, the entire bonus falls in the combined top marginal rate zone: 40% income tax (you are already above the €44,000 standard rate cut-off), 8% USC (you are above the €70,044 threshold), and 4.2% PRSI. Combined: 52.2%. On a €10,000 gross bonus you would receive approximately €4,780 after deductions (Revenue takes €5,220). This is why pension routing of bonuses is particularly valuable in Ireland at this salary level.

In both Ireland and the UK, a bonus is employment income and is subject to the same Income Tax and PRSI or NI rates as your regular salary. There is no separate 'bonus tax rate'. However, because the bonus is added on top of your salary, it is taxed at your highest marginal rate, which is often higher than the average rate on your base salary. Many people find their bonus 'seems more heavily taxed' than their salary, but this is simply because it sits at the top of their income, in the highest band they reach that year. The effective tax rate on the bonus reflects the marginal rate, not the average rate across all your income.

The UK 60% tax trap refers to the zone of income between £100,000 and £125,140 where the Personal Allowance is withdrawn at £1 for every £2 of income above £100,000. This creates an effective income tax rate of 60% on that slice: you pay 40% income tax directly, plus 40% on the allowance you lose (£0.40 IT on £1 of income + £0.20 IT on £0.50 of lost allowance = £0.60 total). With 2% NI added, the combined effective marginal rate in this zone is approximately 62%. If your base salary is below £100,000 but a bonus pushes your income into this zone, some or all of the bonus falls in this 62% range. Redirecting the bonus into a pension contribution is the main strategy to escape it.