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Bonus vs Pension Calculator

See what a bonus is worth in your hand after tax, and what the same cost to your employer would be worth paid straight into your pension.

Using 2026/27 UK tax rates

in £
The amount you are entering
in £

The full cost to the business, including employer National Insurance.

Advanced options

Some employers pass on the saving under salary sacrifice. Others keep it.

in £

Used to check the annual allowance.

Cash in hand from the bonus

£3,130.43

Gross bonus
£4,347.83
Income Tax
− £869.57
Employee National Insurance
− £347.83
Employer National Insurance
£652.17
Total employer cost
£5,000.00
Employer pension contribution instead
£5,000.00
Bonus sacrificed into pension
£5,000.00
Extra in the pension against cash
£1,869.57

Marginal deduction rate on the bonus: 28.0%. Pension money is not available until at least age 55, so this is a comparison of value rather than a recommendation.

What this means

An employer budget of £5,000.00 produces a gross bonus of £4,347.83, leaving £3,130.43 in your hand after deductions of £1,217.40. Paid into a pension instead, £5,000.00 goes in, which is £1,869.57 more than the cash. The right answer depends on whether you need the money now.

Quick answers

Is it better to take a bonus or put it in a pension?
A pension contribution keeps more of the money, because Income Tax and National Insurance are not deducted at the point of contribution. Cash is worth less but is available now, and pension money is locked away until at least pension age.
How much tax is taken off a bonus?
A bonus is taxed as earnings, so it attracts Income Tax at your marginal rate plus employee National Insurance and any student loan repayment. The calculator shows the exact deductions on your figures.
What is bonus sacrifice?
You give up the right to the bonus before it is paid, and your employer pays the amount into your pension instead. It removes Income Tax and National Insurance on that amount, and the employer saves its own National Insurance too.
What is the pension annual allowance?
Usually £60,000.00 a year across all contributions, including employer contributions. It can be lower for high earners and for anyone who has flexibly accessed a pension.

Cash now and pension later are not the same money

A pension contribution avoids tax and National Insurance today, but the money is locked away until pension age and is taxable when drawn beyond the tax-free element.

Check the annual allowance and any employer policy on salary sacrifice before agreeing the split.

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How we calculated it

The bonus is added on top of your salary and taxed at the rates that apply to that extra slice of income. Deductions are worked out as the difference between your position with and without the bonus, so the marginal rate is applied correctly rather than an average rate.

When you enter an employer budget, the gross bonus is solved so that the bonus plus employer National Insurance on it equals the budget. An employer pension contribution carries no National Insurance, so the whole budget can go into the pension.

Under salary sacrifice, the sacrificed amount goes into the pension and the employer can choose whether to add its own National Insurance saving as well. Both options are shown.

Assumptions

A standard Personal Allowance with no adjustments for other income, benefits in kind or unusual tax codes, contributions within the annual allowance unless flagged, a registered pension scheme, and a valid sacrifice arrangement agreed before the bonus is earned. It compares immediate cash outcomes and does not model investment growth or tax on withdrawal.

How this calculator works

A bonus is earnings, so it goes through payroll with Income Tax, employee National Insurance and any student loan repayment taken off, and the employer pays employer National Insurance on top. A pension contribution is treated differently: neither tax nor National Insurance is taken at the point the money goes in, so more of the same employer cost ends up invested.

The trade-off is access. Pension money cannot normally be touched until the normal minimum pension age, currently 55 and rising to 57 from April 2028, and withdrawals are taxable apart from the tax-free lump sum element. If you want to see the effect on your regular pay instead, use the salary calculator, or check your overall position with the income tax calculator.

Sacrifice is particularly effective where a bonus would push income into a band with a high marginal deduction rate, such as the £100,000.00 to £125,140.00 range where the Personal Allowance tapers away.

Worked examples

Basic rate: £35,000 salary, £3,000 budget

The budget funds a bonus of £2,608.70 plus employer National Insurance of £391.30. After Income Tax of £521.74 and National Insurance of £208.70, the cash in hand is £1,878.26. The same budget paid into a pension puts £3,000.00 in, a difference of £730.44.

Higher rate: £60,000 salary, £10,000 budget

The cash route leaves £5,043.48 after deductions of £3,652.17. The pension route puts £10,000.00 in, so £3,652.17 more is working for you.

Allowance taper: £105,000 salary, £15,000 budget

Here the bonus falls in the range where the Personal Allowance is withdrawn, so the marginal deduction rate reaches 62.7% and only £4,860.26 arrives as cash, against £15,000.00 into a pension.

Key terms explained

Salary sacrifice
A formal agreement to give up part of your pay or bonus before it is earned, in return for an employer pension contribution of the same value.
Marginal deduction rate
The share of the next pound of earnings taken in Income Tax, National Insurance and student loan repayments combined.
Annual allowance
The total that can be paid into your pensions each year with tax relief, normally £60,000.00 including employer contributions.

Common mistakes

  • Comparing a gross bonus with a gross pension contribution

    Cash arrives net of tax and National Insurance while a pension contribution arrives gross. Compare net cash against the amount actually invested.

  • Forgetting the employer National Insurance in the budget

    A £5,000 bonus costs the employer more than £5,000. Starting from the employer budget shows the true amount available for either route.

  • Sacrificing below the National Minimum Wage

    A sacrifice cannot reduce pay below the National Minimum Wage, and it can affect statutory pay, mortgage affordability assessments and some benefits.

Common questions

Does a bonus get taxed more heavily than salary?

No. It is taxed at the same rates, but because payroll spreads allowances evenly across the year, a one-off bonus can look over-taxed in the month it is paid and correct itself later in the year.

Does my employer have to offer bonus sacrifice?

No. It needs an agreement in place before you become entitled to the bonus, and not every employer offers it or passes on its own National Insurance saving.

What happens if I exceed the annual allowance?

The excess is charged to Income Tax at your marginal rate, which can remove the advantage. Unused allowance from the three previous years can sometimes be carried forward.

Does a pension contribution help with the Personal Allowance taper?

It can. A contribution reduces adjusted net income, which is the measure used for the taper between £100,000 and £125,140, so it may restore part of the allowance.

Is the pension money tax free?

Not entirely. Tax and National Insurance are not taken at the point of contribution, but pension income is normally taxable when drawn, apart from the tax-free element.

Are Scottish rates different?

Yes for Income Tax. Scottish rates and bands apply to earnings, while National Insurance is the same across the UK. Choose your region above for accurate figures.

Does a bonus affect student loan repayments?

Yes. Repayments are a percentage of earnings above your plan threshold, so a bonus increases the repayment taken in that period.

Sources

Last reviewed: 12 September 2026 · Statutory rates: 2026/27. This calculator is information only and is not tax, accounting or financial advice.