Getting accurate overtime tax calculations is straightforward with this calculator. Here’s what you need to know:
Step 1: Enter Your Salary Details
Start by entering your annual salary before any deductions. This is your gross salary figure from your employment contract. If you’re paid hourly, multiply your hourly rate by your weekly hours, then by 52 weeks.
Step 2: Specify Your Overtime
Enter how many overtime hours you work each month and select your overtime rate. Most employers pay time and a half (1.5x) for weekday overtime and double time (2x) for weekends or bank holidays. Your employment contract will specify these rates.
Step 3: Add Personal Details
Your tax code affects how much tax you pay. Most people have the standard 1257L code for 2025/26, which gives you a £12,570 personal allowance. If you’re not sure of your code, check your latest payslip or leave it as the default.
Quick Example: Sarah earns £35,000 annually and works 10 hours overtime per month at 1.5x her standard rate. Her hourly rate is £17.86. The calculator shows she’ll earn an extra £268 monthly in overtime, but after tax and National Insurance, she’ll take home approximately £201 of that.
What Gets Calculated
The calculator processes your overtime through HMRC’s PAYE system, applying Income Tax and National Insurance contributions just as your employer would. It accounts for your tax band, so if your overtime pushes you into a higher bracket, you’ll see exactly how much extra tax you’ll pay.
How Overtime Tax Works in the UK
Overtime isn’t taxed differently from your regular pay, but it can change how much tax you pay overall. Here’s the reality of overtime taxation:
Tax Bands and Thresholds
For 2025/26, the UK operates four main tax bands in England, Wales, and Northern Ireland:
Personal Allowance: £0 to £12,570 – you pay no tax
Basic Rate: £12,571 to £50,270 – you pay 20% tax
Higher Rate: £50,271 to £125,140 – you pay 40% tax
Additional Rate: over £125,140 – you pay 45% tax
When your regular salary plus overtime crosses into a higher band, only the amount above that threshold gets taxed at the higher rate. This is called marginal taxation.
Real-World Scenario: James earns £48,000 per year. He does £4,000 of overtime annually. His total income is £52,000. The first £12,570 is tax-free, the next £37,700 is taxed at 20%, and the remaining £1,730 (part of his overtime) is taxed at 40%. His overtime didn’t make all his income taxed at 40% – just the portion above £50,270.
National Insurance Contributions
National Insurance is charged at 8% on earnings between £12,570 and £50,270 per year, then reduces to 2% on anything above that. If you’re over State Pension Age, you don’t pay National Insurance at all, making overtime more valuable.
The 60% Tax Trap
There’s a quirk in the system between £100,000 and £125,140. Your personal allowance reduces by £1 for every £2 you earn above £100,000. This creates an effective tax rate of 60% on income in this range. If your overtime pushes you into this bracket, you’ll lose more than half of those extra earnings.
Worth Knowing: PAYE operates on a cumulative basis throughout the tax year. If you do lots of overtime in one month, you might see a higher tax deduction than expected, but this usually balances out over the year. Your tax code helps spread your allowance across all your pay periods.
Frequently Asked Questions
Is overtime taxed more heavily than regular pay?
No, this is a common misconception. Overtime is taxed at exactly the same rates as your regular salary. However, because overtime increases your total annual income, it might push you into a higher tax band, meaning those additional earnings are taxed at a higher rate. The key word here is “marginal” – only the extra income above the threshold faces the higher rate, not your entire salary.
Why does my payslip show different tax amounts each month when I do overtime?
HMRC’s PAYE system works cumulatively. Your employer calculates what you should have paid in tax from the start of the tax year to date, then deducts what you’ve already paid. If you do significant overtime in one month, the system assumes you’ll earn at that higher rate all year and adjusts accordingly. This often corrects itself in following months when your overtime returns to normal levels.
Do I pay National Insurance on overtime?
Yes, overtime counts as earnings for National Insurance purposes. You’ll pay 8% National Insurance on overtime earnings between £12,570 and £50,270 annually, and 2% on anything above that. The one exception is if you’re over State Pension Age – in that case, you don’t pay any National Insurance, making overtime significantly more valuable.
Can doing too much overtime mean I take home less money?
You’ll always take home more money by earning more, but the marginal benefit decreases at higher tax bands. For example, if you’re in the 40% tax band and paying 2% National Insurance, you keep 58p of every extra pound earned. In the £100,000-£125,140 range where personal allowance tapers, you might only keep 40p per pound. You never take home less overall, but the value of additional hours worked does diminish.
What’s the difference between tax code 1257L and BR?
Tax code 1257L is the standard code for 2025/26, giving you a £12,570 personal allowance. BR means “Basic Rate” and is often used for second jobs or additional income sources – it taxes all earnings at 20% with no personal allowance. If you only have one job and your tax code is BR, you should contact HMRC as you’re likely paying too much tax.
How do Scottish tax rates differ for overtime?
Scotland has different tax bands with more gradual increases. For 2025/26, Scottish residents have a Starter Rate (19%), Basic Rate (20%), Intermediate Rate (21%), Higher Rate (42%), and Advanced Rate (45%). These bands kick in at different thresholds, generally resulting in slightly different take-home amounts compared to the rest of the UK, particularly for middle earners.
Should I do overtime if it pushes me into the next tax band?
Financially, yes – you’ll still earn more money overall. Only the income above the threshold is taxed at the higher rate. However, consider the work-life balance and whether the extra take-home pay justifies the additional hours. For example, if you’re in the 40% band, you’ll keep 58% of overtime earnings (after 40% tax and 2% NI). That might be worthwhile for occasional overtime, but perhaps less appealing for regular extended hours.
Maximising Your Overtime Earnings
Whilst you can’t avoid paying tax on overtime, there are legitimate ways to make your extra hours work harder for you:
Pension Contributions
Increasing your pension contributions through salary sacrifice can reduce your taxable income. For every £100 you sacrifice into your pension, you save tax at your marginal rate. If you’re a higher rate taxpayer doing overtime, this could save you £40 in tax, and your employer saves on National Insurance too – many pass these savings back to your pension.
Timing Your Overtime
If you have flexibility, spreading overtime across tax years can help. If you’re close to a tax threshold in March, consider deferring some overtime until after 6th April when the new tax year begins. This keeps you in the lower band for longer.
Childcare Vouchers and Salary Sacrifice Schemes
If your employer offers salary sacrifice schemes for childcare, cycle to work, or technology, these reduce your taxable income. The saving is particularly valuable when your overtime pushes you into higher tax bands.
Practical Example: Lisa earns £48,000 and does £300 monthly overtime. Without changes, she pays 20% tax on most overtime, but some pushes into the 40% band. By increasing her pension contribution to 8% via salary sacrifice, she reduces her taxable income below £50,270, keeping all earnings in the 20% band and actually takes home more despite the pension contribution.
Check Your Tax Code Regularly
An incorrect tax code can mean you’re overpaying tax on your overtime. If you’ve changed jobs, had a salary change, or received benefits, your tax code might need updating. You can check and update it through your Personal Tax Account on GOV.UK.
Common Mistakes to Avoid
Not Checking Emergency Tax Codes
If you’ve recently started a new job and are doing overtime, you might be on an emergency tax code (often showing as 1257L W1 or M1). This doesn’t use cumulative tax calculations, often resulting in overpayment. Contact your employer’s payroll department to ensure they have your P45 or have submitted a Starter Checklist to HMRC.
Forgetting About Student Loan Thresholds
Overtime increases your total income, which affects student loan repayments. Plan 2 loans trigger repayments at £27,295 annually (9% on income above this). If overtime pushes you over this threshold, you’ll see additional deductions. Plan 1 starts at £22,015, and Postgraduate loans at £21,000.
Multiple Jobs Without Informing HMRC
If you’re doing overtime at a second job, HMRC needs to know. Your second job often gets a BR tax code (20% on all earnings). If your total income from both jobs is under £50,270, you might be able to split your personal allowance between them, reducing overall tax.
Important: If you underpay tax during the year due to irregular overtime, HMRC might adjust your tax code the following year to collect the shortfall. Always check your annual tax calculation (P800) and query anything that seems incorrect.
References
HM Revenue & Customs (2025). Income Tax rates and Personal Allowances: Current rates and allowances. Available at: www.gov.uk/income-tax-rates
HM Revenue & Customs (2025). Rates and thresholds for employers 2025 to 2026. Available at: www.gov.uk/guidance/rates-and-thresholds-for-employers-2025-to-2026
HM Revenue & Customs (2025). PAYE tax codes for 2025 to 2026. Available at: www.gov.uk/tax-codes
HM Revenue & Customs (2025). National Insurance contributions rates and categories. Available at: www.gov.uk/national-insurance-rates-letters
GOV.UK (2025). Student loan repayment thresholds and rates. Available at: www.gov.uk/repaying-your-student-loan
Scottish Government (2025). Income Tax in Scotland: Scottish Income Tax rates and bands. Available at: www.gov.scot/publications/scottish-income-tax