Guide · 4 minute read · Updated 10 Jul 2026

Is overtime taxed more in the UK?

No. There is no special tax rate for overtime. It is ordinary earnings, taxed at whatever rate your income has already reached. A big overtime month can still leave a payslip that looks over-taxed, but that is a timing effect, and it corrects itself.

No, there is no overtime tax rate

Overtime is just pay. HMRC does not have a separate, higher rate for hours worked beyond your contracted ones. Every pound of overtime is taxed at your marginal rate, the rate that applies to your next pound of income given everything you have already earned.

If your income for the year sits in the basic-rate band, overtime is taxed at 20% plus 8% National Insurance. If it tips you into the higher-rate band above £50,270, the part above that line is taxed at 40%, though NI on that slice drops to 2%. Nothing about it being overtime changes the rate. What changes the rate is only which band the extra pay lands in.

Why the payslip can still look over-taxed

Here is where the feeling of being punished comes from. PAYE income tax is cumulative and works on an annual model: each pay period, payroll assumes you will earn this month's amount every month for the whole year, and taxes you as if that were your annual salary.

Work a lot of overtime in one month and payroll briefly treats you as though you earn that inflated amount all year. So it may tax part of that month's pay at 40%, or start withdrawing your personal allowance, as if you were heading for a much bigger annual income than you really are. On the National Insurance side, that single month is squeezed against one month's 8% band, so more of it than usual is charged at the main rate. The deduction on the overtime looks savage, and people conclude overtime is taxed more.

It evens out over the year

Because PAYE is cumulative, the over-deduction unwinds on its own. In the following months, when your pay returns to normal, payroll sees that your year-to-date income is lower than that one spike implied, and it takes less tax to bring your cumulative position back in line. You get some of it back through slightly lighter deductions later, without doing anything.

By the end of the tax year, you will have paid tax on your actual annual income at the correct rates, no more. If the year ends before it fully balances, for example because the overtime came in March, HMRC reconciles it afterwards and refunds any overpayment, usually through a P800 letter. The lesson is the same as with a bonus: judge overtime by the annual numbers, not by one ugly payslip. You can sanity-check the annual picture with the take-home pay calculator.

When overtime genuinely costs more

There are a couple of cases where more overtime really does keep less, and neither is an "overtime rate". The first is simply crossing £50,270: pay above that is taxed at 40%, so overtime that pushes you over the line keeps less than overtime below it. That is the higher rate doing its job, and it applies to any income, not just overtime.

The second is the trap between £100,000 and £125,140, where every £2 earned costs £1 of personal allowance and the effective rate reaches about 60%. If overtime lifts you into that zone, it is heavily taxed, the same as a bonus would be. Below £100,000 and away from the higher-rate boundary, the honest answer stays the same: overtime is taxed at your normal marginal rate, and any excess washes out.

Common questions

Is there a special tax rate for overtime in the UK?

No. Overtime is ordinary employment income with no separate rate. It is taxed at your marginal rate, 20% in the basic-rate band or 40% above £50,270, plus National Insurance, exactly like the rest of your pay.

Why does my overtime get taxed so much in one month?

PAYE is cumulative and annualises your pay: a high-overtime month is briefly treated as if you earned that much every month, so more is taxed at higher rates. The over-deduction reverses in later months as your pay returns to normal.

Will I get the extra overtime tax back?

Usually yes, automatically. Cumulative PAYE unwinds the over-deduction through lighter tax in later payslips of the same year. If the year ends first, HMRC reconciles it and refunds any overpayment, typically via a P800 letter.

When does overtime actually leave me worse off?

Only when it pushes income across a threshold: above £50,270 the extra is taxed at 40%, and between £100,000 and £125,140 the tapered personal allowance creates an effective 60% rate. That is the band changing, not a special overtime charge.

Guidance and education, not regulated financial advice.