Overtime Tax UK: How Overtime Pay Is Taxed in 2026/27

There is no special overtime tax rate

Overtime is pay from employment. It joins your salary and other taxable employment earnings; it is not put into a separate tax pot. GOV.UK’s 2026/27 Income Tax guidance says the amount due depends on income above your Personal Allowance and how taxable income falls within the bands. For England, Wales and Northern Ireland, the Personal Allowance is £12,570, the basic rate is 20% up to £50,270 of income, the higher rate is 40% from £50,271 to £125,140, and the additional rate is 45% above £125,140. These are marginal bands: each rate applies to the relevant slice.

This distinction matters. If your taxable earnings are already in the basic-rate band, another pound of overtime is generally charged at 20% Income Tax until your taxable income reaches the next boundary. Once it crosses that boundary, only the amount above the line is charged at the higher rate. The overtime does not cause every pound you earned earlier in the year to be re-taxed at 40%.

The tax year runs from 6 April 2026 to 5 April 2027. The Personal Allowance can be reduced when adjusted net income exceeds £100,000, falling by £1 for each £2 above that point until it is removed. Someone in that taper can face a much higher effective marginal rate than the headline band suggests. The calculator uses the site’s annual tax engine and lets you compare scenarios; people near the taper should check their full adjusted net income and reliefs, not just salary.

How Income Tax bands meet overtime

Think of your annual taxable income as a staircase. The Personal Allowance covers the first part; the basic-rate band follows; higher and additional rates apply only to later slices. Your basic salary, taxable benefits and overtime all contribute to where you stand on that staircase. Pension contributions and other reliefs can affect taxable income, so the gross salary alone may not tell you exactly where a boundary falls.

The worked £30,000 scenario stays within the basic-rate range. With the stated pattern, gross overtime adds £4,500, taking gross annual pay to £34,500. In the site model with no pension or student loan, Income Tax moves from £3,486 to £4,386: a £900 increase, equal to 20% of the extra taxable earnings. National Insurance rises separately. The resulting take-home gain is £3,240 for the year, or £270 a month on average. Every output is from the tax-engine run shown in the table, not a hand estimate.

The £50,000 example sits close to the England, Wales and Northern Ireland higher-rate boundary. Its same four-hour pattern adds £7,500 gross and takes gross pay to £57,500. Under the model, total Income Tax is £10,432, compared with £7,486 at the basic salary alone. The extra tax is £2,946: the first £270 of additional taxable income remains in the basic-rate band, then later taxable pounds cross into the 40% band. National Insurance adds £166.20 in this annual comparison, leaving £4,387.80 more take-home before pension or student-loan deductions.

Scotland has its own employment-income bands and rates. A Scottish taxpayer on the same gross pay can therefore have a different Income Tax result; the calculator includes a nation selector. The employee NI rules are UK-wide. Check the current Scottish rates on GOV.UK if you want to inspect the band limits in detail.

Why one overtime payslip can look heavily taxed

PAYE is the system employers use to deduct Income Tax during the year. With a cumulative tax code, payroll uses your pay and tax-to-date, along with the tax-free pay available so far in the tax year, to calculate the deduction due on that payday. When overtime is included in a regular payday, the higher gross for that period can mean a larger deduction. The payroll calculation is trying to keep the year-to-date total on track; it is not applying a separate punitive overtime rate.

The effect is especially noticeable when overtime is uneven. Imagine a quiet month followed by a large run of extra shifts: the busy payslip can show a sharp jump in tax because the payment raises earnings for that period and changes the cumulative calculation. If later pay is lower, cumulative PAYE may adjust the amount withheld on a later payslip. Your final liability depends on total taxable income for the year and the full tax-code picture.

A week 1, month 1 or other non-cumulative code works differently: tax is calculated for that pay period without using the same year-to-date balancing. An emergency code can also make deductions look wrong while HMRC receives or updates information. If your tax code is temporary, your job changed, or you have more than one job, the amount withheld on one overtime-heavy payday may not match the annual estimate in this calculator.

Income Tax deducted at source is not always the final answer. Check the tax code on your payslip and compare it with HMRC’s record. If the code is wrong, HMRC may update it during the year; if too much or too little tax was deducted, HMRC can reconcile your position. Keep payslips and your P60, and use your Personal Tax Account or HMRC app to check reported pay and tax.

National Insurance does not follow the same annual staircase

Employee Class 1 National Insurance is a separate calculation from Income Tax. For most employees in 2026/27, the main rate is 8% on earnings between the Primary Threshold and Upper Earnings Limit; the rate above the Upper Earnings Limit is 2%. GOV.UK publishes weekly and monthly equivalents because payroll usually calculates NI by earnings period. NI is not simply the annual tax result divided across the year.

That period-based method helps explain a lumpy overtime payslip. If overtime is paid with normal wages in a week or month, the additional amount can raise earnings in that NI period and produce more NI for that payment. HMRC’s National Insurance Manual says one-off payments including overtime are generally included in the earnings period in which they are paid. The exact handling can depend on how and when the employer pays it, and HMRC’s employer guide contains examples for different payment arrangements.

Do not assume a big NI deduction means the overtime has been assessed at an annual higher-rate band. NI has its own thresholds and rates and is worked out for the relevant earnings period. A later quiet month does not necessarily refund NI from a previous month in the way cumulative PAYE may rebalance Income Tax. Multiple employments and director rules have their own treatment, so this guide’s standard employee illustration may not match every payslip.

What employers do with overtime in payroll

An employer records overtime as part of the employee’s pay and runs it through payroll. HMRC’s employer guidance says PAYE and NI are generally operated when earnings are paid, and employers report payroll information for each pay period using a Full Payment Submission. Overtime paid with the normal wage is included in that period’s figures. If a separate extra payday is used, HMRC has special instructions so the employee does not receive a temporary tax refund and then repay it on the ordinary payday.

The earnings period matters particularly for NI. HMRC guidance treats one-off payments such as overtime as part of gross pay in the period when the employer pays them, subject to specific rules for certain pay arrangements. Employers should use the right NI earnings period and follow their payroll software’s current HMRC rules. For Income Tax, the employee’s tax code and whether it is cumulative determine how payroll uses pay-to-date and the allowance for that period.

Your payslip should show gross pay and deductions clearly enough to check the result. Compare the overtime hours and rate against your rota or timesheet; confirm the overtime line was included in gross pay; check the tax code and NI category; and compare pensionable pay with the rules of your scheme. If overtime is absent or the hours are wrong, raise that with payroll before trying to diagnose the tax amount.

A gross-to-net calculator cannot reproduce every payroll run. It does not know when the payment was made, whether a separate payday was used, your tax code, NI category, pension method, benefits, prior pay, second job or payroll corrections. It gives an annual comparison so you can see the likely effect of a pattern. For a single payslip query, payroll or HMRC has the records the calculator cannot see.

The calculator: turn a rota into an annual comparison

Enter your annual basic salary, contractual weekly hours, overtime hours per week and the multiplier in your contract. The calculator estimates the basic hourly rate by dividing annual salary by contracted hours across 52 weeks. It then applies your overtime hours, multiplier and number of weeks to estimate extra gross pay. If your contract states an overtime hourly rate rather than a multiplier, convert it to a multiplier by comparing it with your basic hourly rate, or use the gross overtime calculator linked above to value the hours separately.

The starting scenario is deliberately editable. It uses a £30,000 basic salary, a 40-hour week, four weekly overtime hours at 1.5 times the basic rate and 52 weeks. Those are worked-example inputs, not a statement about normal pay or a legal overtime premium. Change them to match your own offer or payslips. For a seasonal pattern, lower the number of weeks; for irregular overtime, enter a reasonable annual average and treat the output as a scenario rather than a forecast.

The page calculates take-home on your base salary and on base plus overtime using the same nation, pension and student-loan settings. The difference is the estimated annual take-home increase. The optional pension toggle follows the site engine’s salary-sacrifice assumption for its 5% qualifying-earnings model. Workplace schemes vary; if yours uses relief at source or another basis, the pension and NI comparison may not match your payslip. Switch it off for a no-pension comparison.

Use the result to ask a better question of the extra shift: after tax and other selected deductions, what does it add to the year? It is not a pay award forecast, nor does it tell you whether the hours will be offered. A guaranteed hourly premium, voluntary overtime and an employer’s discretionary rota are different things even when the gross arithmetic looks alike.

Myths that make overtime tax harder to understand

“Overtime is taxed at 40%.” It is not assigned a fixed higher rate. Its Income Tax follows your taxable income and bands. Some additional pay may fall at 20%, some at 40%, or some at another rate depending on the employee’s circumstances. The whole overtime cheque is not automatically charged at the highest rate you encounter.

“If I cross a tax threshold, I lose money.” Crossing a marginal threshold does not reduce your total gross pay. It means only the slice within the next band is taxed at that band’s rate. You can still keep additional take-home from more work, although the amount kept per extra pound changes. The Personal Allowance taper above £100,000 is a separate complication that can create a higher effective marginal rate.

“Payroll made a mistake because the overtime month has a huge tax line.” It might be right for that pay date, especially if the amount is unusual or your code is non-cumulative. Check the tax code, taxable pay and tax-to-date, then compare subsequent payroll or HMRC’s year-to-date record. If something still does not reconcile, ask payroll to explain the calculation and check HMRC’s record.

“National Insurance is just another annual tax band.” NI is separate and generally uses the earnings period. An overtime payment can change NI for the week or month in which it is paid. The annual take-home model is useful for a repeated pattern, but a particular NI line needs the period and payment facts.

“The law requires time-and-a-half.” There is no universal statutory overtime multiplier. The rate and whether overtime is compulsory, voluntary, paid or exchanged for time off depend on the contract and workplace terms. Minimum wage rules still apply to pay across working hours; check the applicable rules if a flat rate or unpaid hours leave your average pay in doubt.

What to check before taking extra hours

Start with the written terms. Confirm when overtime begins, which rate the multiplier applies to, whether premiums stack, how hours are rounded and whether approval is needed. Some employers use a different multiplier for weekends or bank holidays. These are contractual details, so do not assume the phrase “time and a half” covers every shift or is guaranteed every week.

Then compare cash with time. Paid overtime adds gross earnings but also uses evenings, weekends or recovery time. Time off in lieu can be more valuable if the real constraint is rest; it may be less useful if the household needs cash. A higher basic rate, guaranteed hours or a pay rise can change future pensionable earnings and other employment calculations in ways one-off overtime may not.

Finally, check the whole payslip rather than treating Income Tax as the only deduction. National Insurance, pension contributions and student-loan repayments can all change when gross pay rises. If you have two jobs, payroll may allocate allowances and NI separately by employment, while your final Income Tax liability considers your wider taxable income. Use HMRC’s account for your official record and ask for advice if you have several employments or unusual tax reliefs.

How the figures are produced

Tax bands and the Personal Allowance are taken from GOV.UK’s 2026/27 Income Tax rates. Employee NI is based on the 2026/27 Class 1 rates and thresholds. HMRC’s 2026/27 employer guide and National Insurance Manual inform the payroll explanation, including the treatment of additional overtime payments. Scotland’s separate rates are linked below. Sources were checked on 4 October 2026.

Worked take-home examples were run through `takeHome()` in the site tax engine using the stated annual gross amounts, England, no pension, no student loan and 2026/27 rates. Overtime gross was generated from the stated salary, contracted hours, weekly overtime, multiplier and weeks in the tsx calculation script before passing the combined gross to `takeHome()`. The results are estimates under those inputs; they are not individual PAYE calculations.

The methodology page explains the wider tax model and the 2026/27 tax guide lists all bands. The about page explains the site and the contact page is open for corrections. This guide was reviewed on 4 October 2026.