See how much of a bonus survives tax and contributions, and the effective rate applied.
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.
Bonus Tax Impact
Net bonus = gross − pension − (gross − pension) × (tax rate + social rate)
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.
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.
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.