Bonus Tax Impact Calculator

See how much of a bonus survives tax and contributions, and the effective rate applied.

About Bonus Tax Impact Calculator

A bonus sits on top of ordinary income, so it is taxed entirely at the marginal rate rather than an average one. Pension contributions come out before tax, which is why diverting part of a bonus into a pension is so much more efficient than taking it as cash. Employees consistently expect a bonus to be taxed at their average rate and are surprised by the marginal outcome, which is a recurring source of payroll queries.

Formula

Bonus Tax Impact

Net bonus = gross − pension − (gross − pension) × (tax rate + social rate)

marginal rate: The rate applied to the top slice of income, which a bonus always occupies

Worked example

With the default values below, Bonus Tax Impact Calculator returns Net Bonus Received of $4,940.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Gross bonusminimum 0: 10,000
Marginal income tax rateaccepts 0–100 %: 40 %
Social or national insurance rateaccepts 0–100 %: 8 %
Pension contribution taken from the bonusaccepts 0–100 %: 5 %

Results

Net Bonus Received: $4,940.00
Total Deductions: $5,060.00
Effective Deduction Rate: 50.60%
Amount Diverted to Pension: $500.00
Take-Home per 1,000 of Bonus: $494.00

Step by step

1Values used
2Bonus Tax Impact
3Net Bonus Received= 4,940.00
4Total Deductions= 5,060.00
5Effective Deduction Rate= 50.60
6Amount Diverted to Pension= 500.00
7Take-Home per 1,000 of Bonus= 494.00

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, fees or charges or compounding frequency into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Bonus Tax Impact calculated?

Net bonus = gross − pension − (gross − pension) × (tax rate + social rate) A bonus sits on top of ordinary income, so it is taxed entirely at the marginal rate rather than an average one. Pension contributions come out before tax, which is why diverting part of a bonus into a pension is so much more efficient than taking it as cash.

Why does Bonus Tax Impact matter?

Employees consistently expect a bonus to be taxed at their average rate and are surprised by the marginal outcome, which is a recurring source of payroll queries.

What values do I need to enter?

This calculator takes 4 inputs: Gross bonus, Marginal income tax rate, Social or national insurance rate, Pension contribution taken from the bonus. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.