What should I do with a work bonus or commission payment? — UK guide

Updated March 2026 Work bonus Typical: £2,000–£50,000

A work bonus hits differently from other windfalls because you already know — roughly — it's coming, you feel you've earned it, and yet when it lands in your account it's often depressingly smaller than you expected. That's the PAYE/NI bite: a £10,000 bonus for a higher-rate taxpayer nets roughly £5,600 after 40% income tax and 2% NI. The first practical question isn't 'where should I put it?' — it's 'how much have I actually got?'

The second reason bonuses are special: there are legitimate ways to receive a bonus in a far more tax-efficient way that you need to decide before the payroll run happens — primarily salary sacrifice into a pension, which avoids both income tax and employer/employee NI. Once the bonus is paid through normal PAYE, that NI-saving opportunity is gone. If you're reading this after the fact, that's fine — there's still plenty you can do — but the pension salary sacrifice question is genuinely time-sensitive in a way that investing decisions are not.

What should I do with spare cash?

A UK-specific guide — personalised hierarchy, allocation, and fund picks. Not regulated financial advice.

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General information only — not FCA-regulated financial advice. We are not FCA-authorised. Consult an FCA-authorised adviser for personal recommendations.

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Fund reference

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OCFs may change. Verify on provider factsheets before investing.

Key considerations

Frequently asked questions

How much of my bonus do I actually keep after tax?
It depends on your tax band. At the basic rate (income up to £50,270): roughly 72p in the pound (20% income tax + 8% NI). At the higher rate (£50,270–£125,140): roughly 58p in the pound (40% + 2% NI). If your total income including the bonus crosses £100,000: the effective rate on that band is 60% due to personal allowance withdrawal. National Insurance is calculated on each pay period, so a one-month bonus may hit a different NI threshold than your salary alone.
Can I ask my employer to pay my bonus directly into my pension?
Yes — this is called 'bonus sacrifice' or 'bonus exchange' and many employers offer it. You sign a variation reducing your bonus entitlement in exchange for an employer pension contribution of the same amount. Because it's structured as an employer contribution, neither you nor your employer pays NI on it — a saving of up to 21.8% between you. Some employers share their NI saving with you as an additional top-up. You need to arrange this before the payroll run; you cannot retrospectively sacrifice a bonus that has already been paid.
I already received my bonus — should I put it in an ISA or a SIPP?
If you're a higher or additional rate taxpayer, a SIPP contribution is typically more efficient because you get tax relief on the way in (40–45%) whereas an ISA does not. The trade-off is that pension money is locked until age 57. A common strategy: max your ISA first for accessible flexibility, then contribute the remainder to a SIPP for the tax relief — especially if you're near the £100k personal allowance taper.
My bonus was £30,000 and I want to pay off my car loan — is that sensible?
If your car loan interest rate is above 5–6%, paying it off will likely beat any guaranteed savings account on a risk-adjusted basis. The psychological value of being debt-free is also real. However, check whether your loan has early repayment charges (ERCs) — some personal loans charge 1–2 months' interest as a penalty. If there's no ERC and the rate is high, clearing it is usually a sound use of a bonus. After clearing the loan, deploy the remainder via the calculator above.
How much did you receive?
£5,000£10,000£20,000£50,000
Other situations
InheritanceISA deadlineRedundancy payoutHouse sale proceedsPension lump sum

General educational information only. Not FCA-regulated financial advice. We are not authorised by the FCA. Consult an FCA-authorised adviser for personal recommendations.