How Overtime Tax Works
Overtime is taxed at your marginal rate — the rate that applies to the extra income on top of what you already earn. This is an important distinction. When you earn overtime, only the additional earnings are taxed at that rate; your regular salary continues to be taxed exactly as before.
For example, if your base salary is £40,000 and you work 5 hours of overtime each week at time-and-a-half, your annual overtime earnings of around £7,500 are simply added on top. Because the first £50,270 is subject to the 20% basic rate, and you are already at £40,000, your overtime earnings are still taxed at 20% (plus 8% NI) — giving you a combined marginal rate of 28%.
However, if your overtime pushes your total income above £50,270, the portion above that threshold is taxed at 40% instead. Crucially, only the part of your overtime that crosses the threshold is taxed at the higher rate — not all of it. So 5 extra hours at time-and-a-half does not suddenly push your entire salary into the 40% band; it only affects the slice that sits above £50,270.
The same principle applies at the £100,000 threshold, where the Personal Allowance taper creates an effective 60% Income Tax rate on earnings between £100,000 and £125,140.
Common Overtime Rates Reference
| Rate Name |
Multiplier |
Meaning |
| Standard |
1.0× |
Same as regular pay — unpaid additional hours |
| Time and a quarter |
1.25× |
Common for weekday evenings |
| Time and a half |
1.5× |
Most common standard overtime rate |
| Double time |
2.0× |
Weekends and bank holidays |
| Triple time |
3.0× |
Bank holidays — rare, usually contractual |
Worked Examples
£25,000 salary, 5 hrs OT at 1.5× (37.5h week)
Base hourly rate£12.82
Overtime hourly rate£19.23
Weekly gross overtime£96.15
Annual gross overtime£5,000
Marginal rate (20% + 8% NI)28%
Weekly net overtime~£69
£40,000 salary, 10 hrs OT at 1.5× (37.5h week)
Base hourly rate£20.51
Overtime hourly rate£30.77
Weekly gross overtime£307.69
Annual gross overtime£16,000
Marginal rate (20%/40% split)~30%
Weekly net overtime~£215
£48,000 salary, 5 hrs OT at 1.5× — crosses 40% band
Base hourly rate£24.62
Overtime hourly rate£36.92
Weekly gross overtime£184.62
Portion above £50,270taxed at 40%
Combined marginal rate~42% on excess
Weekly net overtime~£126
Band Crossing — Only the Excess Is Taxed at 40%
Overtime that pushes your total income above £50,270 is taxed at 40% only on the portion above that threshold — not on all of your overtime earnings. If £2,000 of your annual overtime sits above the threshold and £5,000 sits below it, only the £2,000 is subject to the 40% rate. The calculator handles this split automatically.
UK Law Does Not Require an Overtime Premium
UK law does not require employers to pay a premium rate for overtime — only that your average pay over the pay reference period does not fall below the National Minimum Wage. Whether you receive time-and-a-half, double time, or no premium at all depends entirely on your employment contract or collective agreement. Always check your contract before assuming a particular rate applies.
Frequently Asked Questions
Is overtime taxed at a higher rate than regular pay?
Not necessarily — it depends on where your overtime earnings land relative to the income tax bands. Overtime is taxed at your marginal rate, which is the rate that applies to the topmost slice of your income. If your base salary plus overtime stays below £50,270, your overtime is taxed at the basic rate of 20% (plus 8% NI). Only the portion of overtime that pushes your total income above a threshold is taxed at the higher rate for that band. Your base salary tax does not change.
Does my employer have to pay overtime?
Employers are legally required to ensure your average pay, including overtime hours, does not fall below the National Minimum Wage or National Living Wage. However, there is no statutory right to an enhanced overtime rate such as time-and-a-half. Any premium rate for overtime is a contractual matter — it must be stated in your contract of employment or agreed through a collective agreement with a trade union. Check your written statement of employment particulars for the terms that apply to you.
What is the minimum wage for overtime?
For 2025/26, the National Living Wage (for workers aged 21 and over) is £12.21 per hour. For 18–20 year olds it is £10.00 per hour. For 16–17 year olds and apprentices in certain circumstances it is £7.55 per hour. These rates apply to all hours worked, including overtime. Your employer cannot pay less than the applicable minimum wage rate for any overtime hours worked, regardless of what your contract says about overtime premiums.
Can overtime push me into a higher tax band?
Yes, it can — but only the portion of your overtime that crosses a threshold is taxed at the higher rate. If your base salary is £49,000 and your annual overtime is £3,000, only the £1,730 above £50,270 is taxed at 40%; the remaining £1,270 stays in the 20% band. Your base salary is unaffected. The calculator shows you the exact split. The same applies at the £100,000 threshold, where additional earnings can trigger the Personal Allowance taper and create an effective 60% marginal rate.
How is overtime shown on my payslip?
Most payslips show overtime as a separate line item under gross pay, labelled something like "Overtime" or "OT Pay". It is added to your regular gross pay before tax and NI are calculated. The PAYE system then deducts tax and NI on your total gross earnings for that pay period. Depending on your payroll software and how your employer processes overtime, it may appear as a separate line or be combined with basic pay. Always check the gross pay section of your payslip — the combined figure is what tax and NI are based on.
Does overtime affect my pension contributions?
It depends on your employer's pension scheme rules. Auto-enrolment legislation requires pension contributions to be calculated on "qualifying earnings", which includes overtime pay. However, many employers use a different definition of pensionable pay — for example, basic salary only — which would exclude overtime. Check your pension scheme documentation or speak to your HR department to find out whether overtime is included in the earnings base for your pension contributions. If it is, both you and your employer will contribute a percentage on the overtime amount as well.
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