Your rise is taxed at your worst rate, not your average one
30-Second Summary:
- Your pay rise is taxed at your highest band: It sits on top of your current income, meaning zero tax-free allowance applies to the raise.
- The £100k–£125k Trap: Earning between £100,000 and £125,140 triggers an effective 60%+ tax rate as your Personal Allowance is withdrawn.
- Bonus Surprise: National Insurance on a one-off bonus drops to 2% once you cross monthly earnings thresholds, making bonuses cheaper in NI than standard salary rises.
Your pay rise hits your highest tax band — not your average rate. You've been given a pay rise or promotion, but when you run the numbers on your payslip, something feels off. Here is why: a pay rise is stacked on top of your existing salary. Because your current earnings have already consumed your Personal Allowance and lower tax bands, every new pound lands directly in your highest marginal band.
Your existing salary has already used up the cheap part
The tax-free slice and the lower band are spent before the rise arrives.
Income tax and National Insurance are both charged in bands, and your current salary has already filled the bottom ones. The rise doesn't get to start again at the bottom. It sits on top, in whatever band you happen to be in when it lands — and sometimes in a band you weren't in at all until it pushed you there.
It's why a rise that looks like a tenth of your salary rarely feels like a tenth more money.
What you actually keep, per pound of rise
Between roughly 72p and 38p, depending on where you already are.
The figures, and where they come from
Each row is what one extra pound of salary is worth in your account, computed from this site's own calculator rather than read off the headline rates. England, Wales and Northern Ireland, 2026/27.
| Your salary before the rise | You keep, per £1 | With a Plan 2 loan |
|---|---|---|
| £20,000 | 72p | 72p |
| £30,000 | 72p | 62p |
| £45,000 | 72p | 64p |
| £60,000 | 58p | 48p |
| £101,000 | 38p | 30p |
| £130,000 | 53p | 43p |
At £20,000 the two columns agree because that salary is below the Plan 2 repayment threshold, so there is nothing to deduct.
The 60% Tax Trap: Earnings between £100,000 and £125,140
For every £2 you earn above £100,000, you lose £1 of your tax-free Personal Allowance. This creates an effective 60% income tax rate (plus NI and student loans), meaning you keep as little as 38p per £1 earned. Ironically, a pound earned at £130,000 is worth more to you than a pound earned at £110,000.
It's the one place on the scale where earning more is worth conspicuously less, and almost nobody gets told about it.
A student loan takes its share of the rise as well
Nine pence in the pound, on everything above your plan's threshold.
If you're repaying, that comes off on top of income tax and National Insurance. It's not a tax and it doesn't behave like one — your student loan and your payslip is the page on that.
A bonus is not a rise, and it behaves differently
Everything above is about a bigger salary every month. A one-off bonus follows different rules, and one of them surprises almost everyone.
A rise changes every payslip. A bonus changes one — and the deductions on that one payslip are not simply a bigger version of a normal month's.
Income tax on a bonus is not special. It sits on top of the pay you already have, so it is charged at whatever rate your next pound was going to be charged at anyway. If your whole bonus fits inside one band, it is taxed at that one rate, flat, with no cliff and nothing clever going on.
The Bonus Secret: Why National Insurance drops to 2% National Insurance is calculated per pay period, not annually. If a lump-sum bonus pushes your single monthly earnings over the upper threshold, National Insurance on the extra amount drops from 8% down to 2%. It is the single most surprising mechanic in payroll—and almost no standard online calculator highlights it.
A student loan takes its full share of a bonus in one go. Your deduction is worked out per payslip, with no smoothing across the year, so a bonus month takes a full percentage of the bonus in that month rather than spreading it.
Bonuses do not get "emergency-taxed", except in April
There is a grain of truth in it, and it is one month wide.
The folklore says bonuses get taxed at some punitive rate and you claim it back. Mostly that is people meeting their marginal rate for the first time and assuming something has gone wrong.
But there is a real version of it, and it happens in April. PAYE spreads your tax-free pay and your tax bands evenly across the twelve months of the year. In month one, only a twelfth of each band is available — and a twelfth of a band cannot hold a month that has a bonus in it. So part of the bonus is taxed at a higher rate than it should be.
It comes back in the next payslip, in full, and the year's total is identical. From May onwards there is no distortion at all.
One exception, and it does not correct itself. If your tax code ends in W1, M1 or X, your tax is worked out on each payslip on its own rather than balanced across the year. A bonus month on one of those codes is taxed as though you earned that much every month, and nothing puts it right during the year. It comes back after the tax year ends, usually automatically when HMRC reconciles the year. More on what those codes mean.
Where this breaks down
A rise always leaves you with more money in tax terms. It does not always leave you better off overall.
No band takes more than a pound of a pound, so there is no tax trap that makes a rise cost you money. That part is solid.
What can genuinely leave you worse off sits outside tax altogether. Crossing £100,000 of adjusted income ends eligibility for tax-free childcare and the funded hours, and for a household using them the loss can be worth far more than the rise. Benefits that taper on income behave in a similar way. This calculator does not model any of that — it works out tax, National Insurance and student loan, and nothing else.
Pension contributions and salary sacrifice change these numbers too, and the calculator does now handle them — but which of the three arrangements your employer uses makes a real difference to what a rise is worth to you. How the three differ.
So what should you compare the offer against?
Not last month's payslip against the new salary — those are two different kinds of number. Compare what lands in your account now against what would land after the rise, which is what the calculator shows you side by side, with each deduction on its own line.
I can't tell you what to do about your own pay. I don't know your situation, and this is information rather than advice.
2026/27 tax year, from GOV.UK and the Scottish Government. What this calculator assumes and doesn't handle.