A bonus can be taxed surprisingly heavily, and sometimes overtaxed through PAYE. We explain what you will actually keep, check whether you have overpaid, and show how sacrificing part of it into a pension can cut the tax dramatically.
Bonus Tax
A bonus is taxed as ordinary income, but a large one-off payment can be overtaxed through PAYE because the system briefly assumes you will keep earning at that rate, and it can also push you into a higher tax band or into the personal-allowance taper over £100,000. Sacrificing some or all of a bonus into a pension before it is paid can avoid both Income Tax and National Insurance on that portion.
Your Tax Help Accountants checks whether your bonus was overtaxed and reclaims any overpayment, and, ideally before the bonus is paid, models bonus sacrifice into a pension to reduce or remove the tax hit, especially valuable if the bonus tips you over £100,000. You keep more of what you earned.
If a bonus pushes you over £100,000 it can be effectively taxed at around 60 per cent because of the personal-allowance taper. Sacrificing that part into a pension is often the single most efficient move, but it usually has to be arranged before the bonus is paid.
The Detail That Matters
A bonus is taxed as normal earnings, but because it can push you into a higher band, or into the 60% personal-allowance trap, it often feels punitively taxed. With planning, especially pension sacrifice, you can keep far more of it.
A bonus is added to your income and taxed at your marginal rate, plus National Insurance, and PAYE often deducts it at a high rate in one month, which can overtax it temporarily before the year evens out. The headline deduction can look alarming.
If a bonus takes your income between £100,000 and £125,140, it is effectively taxed at 60% as your personal allowance tapers away; if it crosses £50,270 it hits 40%. Knowing where your bonus lands is the key to planning it.
Sacrificing some or all of a bonus into your pension before it is paid avoids Income Tax and National Insurance on that amount, and your employer may add their saved National Insurance too. In the 60% band this is exceptional value.
Where PAYE overtaxes a bonus in one month, it usually corrects over the year, and we reclaim any genuine overpayment. Timing a bonus across tax years, where possible, can also keep it in a lower band.
People accept a heavily taxed bonus as unavoidable, when sacrificing it into a pension, particularly in the 40% or 60% bands, would have converted tax into savings at extraordinary effective relief.
Key Figures
How We Help
Large bonuses are often overtaxed through PAYE. We check what you actually owe and reclaim any overpayment from HMRC.
Sacrificing part of a bonus into a pension can avoid Income Tax and National Insurance on that portion, we model it, ideally before the bonus is paid.
If a bonus tips you over £100,000 and into the 60 per cent taper, we plan to keep your income below the threshold and preserve your allowance.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
People assume nothing can be done about bonus tax, but overpayments through PAYE are common and reclaimable, and pre-planned pension sacrifice can dramatically cut the tax, especially near £100,000. The key is acting before the bonus is paid where possible.
Recent Client Outcome
A client earning £95,000 received a £20,000 bonus that would have pushed £15,000 of it into the 60% personal-allowance trap.
What we did. We arranged a bonus-sacrifice of £15,000 into their pension before payment, keeping their income at £100,000, and their employer added part of its saved National Insurance.
The outcome. The £15,000 went into the pension free of Income Tax and National Insurance, avoiding the 60% effective rate, so it cost them far less than £15,000 of net pay, and preserved their personal allowance.
Rather than losing most of the bonus to tax, they converted it into pension savings at exceptional value.
Why People Come to Us
Questions Answered
Free fifteen-minute call. Fixed quote within twenty-four hours. Your return filed, every expense claimed, your bill explained, and salon VAT, payroll and accounts handled if you own a salon. Same accountant, start to finish.
Or email info@yourtaxhelp.co.uk, we typically respond within two business hours.
📅 Free consultation calls available weekdays 1pm to 3pm and 7pm to 8pm. Pick a slot that suits you.