Understand exactly how bonuses affect your PAYE deductions, especially student loans. See why your student loan deduction spikes dramatically in bonus months.
Normal month SL deduction: £101
Bonus month SL deduction: £551
Extra SL deduction due to bonus: £450
Student loan deductions are calculated on your total monthly income including bonuses, which can dramatically increase the deduction amount.
Bonuses are added to your regular monthly income for PAYE calculations, often pushing you into higher tax bands and dramatically increasing student loan deductions.
Annual: £42,000
Combined monthly income: £8,500
Month affects cumulative tax calculations
Personal allowance: £12,570
England, Wales & NI tax rates apply
9.0% above £2,373
Consider the true cost:
A £5,000 bonus may only net you £2,546.467 after all deductions - that's just 50.9% of the gross amount.
Salary sacrifice alternatives:
Consider whether pension contributions, cycle-to-work schemes, or other salary sacrifice options might be more tax-efficient than cash bonuses.
Spread over multiple months:
Some employers allow spreading bonuses across multiple months, which can reduce the student loan impact by keeping monthly income closer to thresholds.
Bonus month deductions can be shocking, especially student loan amounts. Understanding how PAYE works helps you plan better and avoid surprises.