Overtime is not taxed at a higher rate. It is added to your pay for the period and taxed at your marginal rate, the rate that applies to the top slice of your income: 20% income tax plus 8% National Insurance for most basic rate earners, so a basic rate worker keeps 72p of every extra pound, and 40% plus 2% for a higher rate earner, who keeps 58p. Ten hours at time and a half on a £15 hourly rate is £225 gross and £162 in hand for a basic rate taxpayer. The impression that overtime is taxed more usually comes from a large overtime month being taxed as if it were the new normal, which corrects itself over the year.
What overtime is worth after deductions
| Salary | Hourly rate | Overtime rate | Hours | Gross overtime | Deductions | Take-home |
|---|---|---|---|---|---|---|
| £25,000 | £12.71 | time and a quarter, £15.89 | 20 | £317.75 | £88.97 | £228.78 |
| £30,000 | £15.00 | time and a half, £22.50 | 10 | £225.00 | £63.00 | £162.00 |
| £30,000 | £15.00 | time and a half, £22.50 | 40 | £900.00 | £252.00 | £648.00 |
| £48,000 | £24.00 | time and a half, £36.00 | 20 | £720.00 | £201.60 | £518.40 |
| £48,000 | £24.00 | double time, £48.00 | 10 | £480.00 | £134.40 | £345.60 |
| £60,000 | £30.00 | time and a half, £45.00 | 20 | £900.00 | £378.00 | £522.00 |
The deductions are 28% for everyone below the higher rate threshold and 42% above it, because National Insurance falls from 8% to 2% at the same £50,270 point where income tax rises from 20% to 40%. A student loan adds 9% of overtime above the repayment threshold on the relevant plan, and a pension contribution on overtime, where the scheme includes it, reduces the taxable amount. The overtime pay calculator works the gross and net figures for any rate, multiplier and hours, and the shift pay calculator does the same for unsocial hours premiums.
Crossing the £50,270 line
The £48,000 earner in the table keeps 72% of overtime only while total pay for the year stays under £50,270. Overtime of more than £2,270 across the year takes the excess into the 40% band, where the marginal deduction becomes 42%. The same effect applies at other thresholds: overtime that lifts a parent’s income above £60,000 begins to withdraw Child Benefit through the High Income Child Benefit Charge, with the benefit gone at £80,000, and above £100,000 it withdraws the personal allowance at a 60% effective marginal rate and ends Tax-Free Childcare and the funded hours. None of this makes overtime not worth doing, but the take-home from extra hours near a threshold is smaller than the hourly rate suggests. The take-home pay calculator shows the annual effect of a given amount of overtime on top of salary.
Why a big overtime month looks over-taxed
PAYE spreads the personal allowance and basic rate band evenly across the year, one twelfth each month. A month with £900 of overtime on a £2,500 salary is taxed with only one month’s allowances, so if the extra pay pushes that month’s total above one twelfth of £50,270, part of it is taxed at 40% even though the year as a whole will stay in the basic rate band. The overpayment is corrected automatically in later months as the cumulative calculation catches up, or refunded after the year end if the job ends first. Our guide to why you paid more tax this month sets out the mechanics, and the bonus tax guide covers the same effect for one-off payments.
Your rights on overtime
There is no statutory right to overtime pay or to an enhanced rate; the contract decides whether overtime is paid at all and at what multiple. Employers cannot force overtime unless the contract provides for it, and no one can be required to work more than 48 hours a week on average over 17 weeks without signing an opt-out. Pay averaged across all hours worked must not fall below the National Minimum Wage, and overtime premiums are ignored when checking that: a worker on £12.71 an hour paid time and a half for overtime is compliant, but a salaried worker whose unpaid overtime drags average hourly pay below £12.71 is not. Regular overtime must also be reflected in holiday pay, as our holiday entitlement guide explains.
Part-time workers and overtime
A part-time worker who does extra hours is normally paid at the basic rate until they exceed the full-time hours for the role, unless the contract says otherwise. Extra hours for a part-time worker are taxed like everyone else’s, and for lower earners the marginal deduction can be zero: someone earning £10,000 a year has £2,570 of unused personal allowance and pays no income tax or National Insurance on overtime until they pass £12,570. The hourly to annual salary calculator converts an hourly rate and weekly hours into the annual figure.
Common questions
Is overtime taxed at a higher rate? No. It is added to your pay and taxed at your marginal rate: 20% plus 8% National Insurance in the basic rate band, 40% plus 2% above £50,270.
How much of my overtime will I take home? About 72% in the basic rate band and 58% in the higher rate band, less any student loan repayment at 9% and pension contributions.
Why was my overtime taxed at 40% when I earn £30,000? Because PAYE taxes each month with one twelfth of the year’s allowances. A large overtime month can be taxed partly at 40% and the excess is refunded through later payslips.
Does overtime affect Child Benefit or childcare? It can. Adjusted net income above £60,000 starts the High Income Child Benefit Charge, and above £100,000 removes Tax-Free Childcare and the funded hours.
Do I have to be paid extra for overtime? Only if the contract says so. Average pay across all hours must not fall below the National Minimum Wage, with overtime premiums excluded from that check.
Is overtime included in holiday pay? Regular overtime is. Holiday pay for variable earners is the average of the last 52 paid weeks including regular overtime and commission.
Information, not financial advice. Rates and thresholds are the published 2026/27 figures on gov.uk: income tax rates and gov.uk: National Insurance rates; worked figures are from the site’s calculator for an employee on a standard tax code. Contracts govern overtime pay itself, so check yours before acting on them.