Overtime Tax Impact Calculator
Working extra hours should put more money in your pocket, but overtime is taxed at your marginal rate – often 40% or more when National Insurance is included.
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Your regular salary benefits from the tax-free Personal Allowance, while overtime does not. If your overtime pushes you into a higher tax band or above £100,000, you could face marginal rates of 40-60%.
Knowing how much overtime tax you'll pay helps you decide whether extra hours are worthwhile. Enter your salary and overtime details below to see exactly what you'll keep.
Overtime Tax Impact Calculator
See how overtime affects your take-home pay and understand your marginal tax rate
Your regular salary before any overtime
Average overtime earnings per month
Your Overtime Impact
Overtime tax band: Basic Rate (20% income tax)
Annual take-home without overtime
£28,719.60
(£2,393.30/month)
Annual take-home with overtime
£33,039.60
(£2,753.30/month)
Extra take-home from overtime
+£4,320.00
(+£360.00/month)
Deductions on Overtime (Annual)
Per-Period Breakdown
What you actually receive each month
Gross Overtime
£500.00
per month
Deductions
-£140.00
per month
Net Overtime
£360.00
per month
Keep Rate
72%
of overtime
📊 See if overtime is really worth it
Emma tracks your income, bills and spending so you can see the real impact of extra hours on your finances.
Try Emma for freeWhat this means for your extra hours
Overtime is taxed at your marginal rate — the rate that applies to your next pound of income, not your average rate. If you're a basic-rate taxpayer that's 28% (20% tax + 8% NI). Higher-rate taxpayers face 42%, and anyone whose overtime pushes earnings into the £100k–£125k range loses Personal Allowance too, hitting an effective 60% marginal rate.
If overtime regularly pushes you into a worse band, salary sacrifice into a pension or claiming WFH/uniform tax relief can pull your taxable income back down — sometimes turning a 60% bite into a 42% one. Worth modelling before you commit.
Marginal vs Average Tax Rates Explained
Understanding the difference between marginal and average tax rates is key to understanding why overtime can seem more heavily taxed than your regular pay.
Average Tax Rate
Your average rate is your total tax divided by total income. If you earn £40,000 and pay £5,500 in tax, your average rate is 13.75%. This blends all tax bands together and includes your tax-free Personal Allowance.
Marginal Tax Rate
Your marginal rate is what you pay on your next pound earned. Overtime is always taxed at your marginal rate because it's added on top of your existing salary – it doesn't benefit from the tax-free allowance.
Example
On a £35,000 salary, your average tax rate might be around 14% overall. But your marginal rate on overtime is 28% (20% tax + 8% NI). This is why overtime "feels" more taxed – you're comparing it to your blended average, not the appropriate marginal rate.
Why Overtime Can Appear Heavily Taxed
There are several reasons why overtime deductions can seem surprisingly high:
1. No Personal Allowance Benefit
Your £12,570 Personal Allowance is already used up by your regular salary. Every pound of overtime is therefore taxable from the first penny.
2. PAYE Timing Effects
When you work more overtime in one month, PAYE systems may annualise that higher amount and over-deduct tax temporarily. This usually corrects itself in subsequent pay periods.
3. Threshold Crossing
Overtime might push you from the basic rate (20%) into the higher rate (40%) band, or past £50,270 where NI drops from 8% to 2% – but the sudden rate change can feel dramatic.
4. Student Loan Repayments
If you have a student loan, an extra 9% (or 6% for postgrad) is deducted on income above your plan threshold. This adds to the apparent "tax" on overtime.
Combined Marginal Rates on Overtime
| Income Band | Tax | NI | Student Loan | Total |
|---|---|---|---|---|
| £12,571 - £50,270 | 20% | 8% | 0-9% | 28-37% |
| £50,271 - £100,000 | 40% | 2% | 0-9% | 42-51% |
| £100,000 - £125,140* | 60% | 2% | 0-9% | 62-71% |
| Over £125,140 | 45% | 2% | 0-9% | 47-56% |
*The 60% trap occurs because your Personal Allowance is reduced by £1 for every £2 earned over £100,000.
How to Keep More of Your Overtime
Pension Contributions
If your employer offers salary sacrifice, you can direct overtime into your pension before tax and NI are calculated. A higher-rate taxpayer saves 42% (or more in the 60% trap) on every pound sacrificed.
Try the Salary Sacrifice Calculator →Time Off in Lieu (TOIL)
Some employers offer time off instead of overtime pay. While you won't earn extra cash, you also won't pay the marginal tax. Consider this if you're near a tax threshold.
Avoid the 60% Trap
If overtime takes you over £100,000, consider making pension contributions to bring your adjusted net income below this threshold. You'll keep your full Personal Allowance and effectively pay 60% less tax on that portion.
Spread Overtime Across the Year
If you have flexibility, spreading overtime evenly rather than bunching it in certain months can prevent PAYE over-deduction issues and smooth your cash flow.
Frequently Asked Questions
Related Calculators
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Bonus Tax Calculator
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Take-Home Pay Calculator
Calculate your overall salary after tax, NI, pension, and student loans.
Salary Sacrifice Calculator
See how much you can save by sacrificing overtime into pension or benefits.
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