Key facts
- Overtime is taxed as normal income through PAYE, not at a special higher rate
- Basic-rate taxpayers keep 72% of overtime (20% income tax plus 8% National Insurance)
- Higher-rate taxpayers keep 58% and additional-rate taxpayers keep 53% of each overtime pound
- Overtime only feels heavily taxed when it pushes income above £50,270 into the 40% band
Overtime follows the same bands as the rest of your pay, set out in income tax bands guide and National Insurance rates guide, and it appears on your wage slip as explained in how to read your payslip guide.
| Your tax band | Income tax | National Insurance | You keep |
|---|---|---|---|
| Basic rate (income £12,571 to £50,270) | £20 | £8 | £72 |
| Higher rate (income £50,271 to £125,140) | £40 | £2 | £58 |
| Additional rate (income over £125,140) | £45 | £2 | £53 |
Based on £100 of gross overtime taxed at your top band. Source: GOV.UK rates, WhatsUK calculation, June 2026.
The reason overtime can feel punished is the band boundary, not a special rate. If your normal salary is just below £50,270 and overtime lifts your total over it, the slice above £50,270 is taxed at 40% instead of 20%, so that pay packet looks heavily taxed. Nothing has changed permanently, the higher rate only applies to the pounds above the threshold, and a quieter month taxes you normally again.
See your full take-home including overtime with the contractor take home calculator.
The PAYE Overtime Myth, Explained
The myth: overtime is taxed at 40%.
The reality: overtime is taxed at your marginal rate, which is 20% if your total earnings (salary plus overtime) stay within the basic rate band, and 40% only on any portion that moves above £50,270.
The reason overtime feels more taxed comes down to cumulative PAYE. In months where you work significant overtime, the payroll calculation annualises your earnings and applies the tax bands accordingly. If a single month of overtime pay pushes your projected annual equivalent earnings above a tax band threshold, the excess is deducted at the higher rate that month. In following months with less overtime, you receive a correction, and your effective cumulative tax rate normalises.
Example: Your base salary is £36,000 (£3,000/month). In March you earn an extra £1,500 overtime. Your monthly payslip calculates tax as if you earn £4,500 every month, annualised to £54,000. That puts some income into the higher rate band. HMRC then corrects the position across the rest of the tax year, but if March is a one-off spike, you see a large deduction that month without a visible correction until the following payslip.
Expert Tip
Never refuse overtime solely because you believe it will be taxed at 40%. Even if overtime pushes total earnings above £50,270 for the year, only the slice above that threshold attracts 40%. The after-tax value of overtime is always positive. At 20% basic rate and 8% NI, you keep 72p of every extra £1. At 40% higher rate and 2% NI, you keep 58p. Overtime always increases your take-home pay.How Your Overtime Is Calculated
The two most common overtime rates in the UK are time-and-a-half (1.5x your hourly rate) and double time (2x your hourly rate). Your employer calculates your regular hourly rate and multiplies it accordingly.
Converting annual salary to hourly rate (standard assumptions): annual salary divided by 52 weeks divided by average weekly hours.
For a £30,000 salary at 37.5 hours per week: £30,000 divided by 52 divided by 37.5 = £15.38 per hour.
- Time-and-a-half: £15.38 x 1.5 = £23.08 per overtime hour
- Double time: £15.38 x 2 = £30.77 per overtime hour
Overtime Calculator
Get your exact hourly overtime rate and the estimated net pay for any number of overtime hours. Updated for 2026/27.
Take-Home From Overtime at Different Salary Levels
| Base Salary | Overtime Hours/Month | Rate | Gross Overtime | After Tax and NI | Effective Rate |
|---|---|---|---|---|---|
| £25,000 | 10 x time-and-a-half | £18.03/hr | £180.29 | £129.81 | 28% |
| £35,000 | 10 x time-and-a-half | £25.24/hr | £252.40 | £181.73 | 28% |
| £48,000 | 10 x time-and-a-half | £34.62/hr | £346.15 | Approx £224 | 35% |
| £55,000 | 10 x time-and-a-half | £39.42/hr | £394.23 | £234 (40% + 2% NI) | 40.6% |
These figures illustrate that even at higher rate taxation, overtime is always net positive. The effective combined rate (income tax plus NI) for a basic rate payer is 28%. For a higher rate payer, 42%.
Annual Overtime Earnings and Your Tax Code
If you work regular overtime throughout the year, your cumulative earnings will be accurately reflected in HMRC's end-of-year reconciliation. Your P60 will show total gross earnings, total income tax paid, and total NI, regardless of how the monthly payslip calculated it.
If you receive a large overtime payment in the final months of the tax year and your payroll does not adjust for the cumulative position, you may overpay tax temporarily. HMRC reconciles this after 5 April and issues a P800 tax calculation. Any overpayment is refunded, usually within two to three months of the tax year end.
Overtime and National Insurance
National Insurance is calculated on a non-cumulative basis, meaning each pay period is independent. There is no annual reconciliation for NI as there is for income tax. If a high overtime month pushes your NI category A earnings above £4,189 per month (the monthly equivalent of the upper earnings limit), the excess overtime is charged at 2% rather than 8%.
This means very high overtime earners can face a situation where their income tax rate rises (from 20% to 40%) while their NI rate falls (from 8% to 2%) in the same month. The combined effect: 42% on basic rate earnings (20% tax plus 8% NI) and 42% on higher rate earnings (40% tax plus 2% NI) is coincidentally similar, but the components shift.
Overtime and Pension Contributions
If you are auto-enrolled in a workplace pension, your employer may or may not include overtime pay in the pensionable earnings calculation. Many pension schemes use qualifying earnings (based on a £6,240 to £50,270 band), which means overtime pay above the upper limit (£50,270) is not pensionable. Schemes that use basic pay only will not include overtime at all.
Check your pension scheme rules. If overtime is pensionable, a salary sacrifice pension contribution on your overtime pay saves both tax and NI, improving the net position significantly. The Salary Sacrifice Calculator can model the impact of sacrificing overtime pay into your pension.
Related Calculators
Frequently Asked Questions
No. Overtime is taxed at exactly the same rates as your normal pay, because it is simply added to your earnings for the period. There is no separate, higher overtime tax rate. A basic-rate taxpayer keeps 72% of overtime, the same proportion as the rest of their pay in that band.
You pay your normal rates: 20% income tax plus 8% National Insurance if you are a basic-rate taxpayer, so you keep £72 of every £100. A higher-rate taxpayer pays 40% plus 2%, keeping £58, and an additional-rate taxpayer keeps £53. The exact amount depends on your total income for the year.
Usually because the overtime pushes part of your income into the next tax band. If your salary is just under £50,270, overtime above that level is taxed at 40% instead of 20%, so that payslip looks heavily taxed. It is only the pounds above the threshold that are taxed at the higher rate.
Only the part of your income above the threshold is taxed at the higher rate, never your whole income. So if overtime lifts you just over £50,270, only the amount above £50,270 is taxed at 40%. You are always better off taking the overtime, you just keep a smaller share of the part in the higher band.
Yes. National Insurance applies to overtime like any other earnings, at 8% for most employees on income between £12,570 and £50,270, then 2% above that. Because the 8% rate stops at £50,270, higher earners actually pay less National Insurance on overtime above that point, only 2%.
If overtime appears before your correct tax code is in place, payroll may use an emergency code and tax it more heavily for that period. This often happens in a new job. Once your correct code is applied, HMRC adjusts the figures and refunds any overpaid tax through your pay.
Almost always yes. Even a higher-rate taxpayer keeps £58 of every £100 of overtime, and a basic-rate taxpayer keeps £72. You never lose money by earning more, you simply keep a smaller proportion of any part that falls in a higher band. Pension salary sacrifice can increase what you keep.
PAYE spreads your tax-free allowance evenly across the year, so a month with extra overtime can be taxed more heavily because the system briefly assumes that higher level continues. It usually balances out over the following months, and any overpayment is corrected automatically through your tax code.
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James Hartley is a Chartered Management Accountant (CIMA) with more than eight years of experience in UK tax, payroll and compliance. He holds a BSc in Finance and Economics from the University of Manchester and spent his early career at a Big 4 accounting firm. He founded WhatsUK to build free UK financial calculators and guides verified against official HMRC sources. He authors every calculator and article on WhatsUK.
Sources & Official References
- HMRC: Rates and thresholds for employers 2025 to 2026- Official PAYE rates and thresholds
- GOV.UK: Overtime pay- Employee rights regarding overtime
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Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.