Precision Utility
Commission Tax Calculator: Is My Commission Pay Correct?
Sales commissions and performance bonuses are processed through PAYE and taxed as the top slice of your employment income, not at a separate flat rate. In any single month where you receive a commission payout, your payslip may show a temporary spike in tax deductions because PAYE annualises that month's earnings; any over-deduction is automatically reconciled across subsequent payslips.
28% marginal deduction (20% Income Tax + 8% NI) → Keep ~£72 per £100
42% marginal deduction (40% Income Tax + 2% NI) → Keep ~£58 per £100
~62% marginal deduction (40% IT + 20% allowance clawback + 2% NI) → Keep ~£38 per £100
*Rates for England, Wales & Northern Ireland employees. Scottish taxpayers follow devolved starter to top bands (19%–48% + NI). Employer NI (15%) is paid directly by your employer above £5,000/yr and cannot be deducted from worker commission.
| Base Salary | Commission | Total Gross | Annual Net Take-Home | Monthly Net |
|---|---|---|---|---|
| £30,000 | £5,000 | £35,000 | £28,520 | £2,377/mo |
| £40,000 | £10,000 | £50,000 | £39,320 | £3,277/mo |
| £50,000 | £15,000 | £65,000 | £48,260 | £4,022/mo |
| £90,000 | £20,000 | £110,000 | £72,220 | £6,018/mo |
Tax Year
2026/27
NLW (21+)
£12.71/hr
Check whether your commission-based pay meets the legal minimum for your age group. Enter your annual base salary, monthly countable commission and hours worked in the same monthly pay reference period — the calculator instantly shows your effective hourly rate, compares it against the 2026/27 National Minimum Wage and highlights any shortfall.
Your Details
This models one monthly pay reference period: base pay is annual salary divided by 12. Enter countable commission allocated to that same period and all hours that count for minimum wage. Timing, deductions, expenses, salaried-hours rules and apprentice rates are not modelled; this arithmetic comparison is not a legal underpayment decision. Annualised shortfall and take-home assume the same monthly pay repeats for 12 months; PAYE estimate uses England/Wales/Northern Ireland rates, standard allowance and no pension or loans. HMRC pay-period rules.
Minimum Wage Status
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Total Monthly Pay
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Effective Hourly Rate
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Minimum Rate for Age
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Meets Minimum Wage
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Est. Take-Home (Annual)
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Est. Take-Home (Monthly)
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Standard tax code · No pension · 2026/27
Shortfall / Hour
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Shortfall / Month
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Annualised Illustration
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How the commission pay checker works
Enter your annual base salary, the commission you earned this month and the total hours you worked. The calculator divides your base salary by 12 to find the monthly portion, adds your commission on top, then divides the total by your hours to produce an effective hourly rate.
That rate is compared against the correct 2026/27 National Minimum Wage or National Living Wage for your age group. If your effective hourly rate falls below the legal minimum, the tool highlights the shortfall per hour, per month and per year as an illustration from the supplied figures; it does not establish arrears owed.
Results update automatically whenever you change any input. There is no need to press the button each time — though you can if you prefer.
Commission pay and minimum wage — what you need to know
Commission counts towards minimum wage but must be allocated to the correct pay reference period. Commission earned in one period and paid in the next can count back to the earlier period; it must not be counted twice. Your employer must ensure that your total pay — base salary plus any commission — divided by the hours you worked in that period equals at least the National Minimum Wage for your age group. Here are the 2026/27 rates from 1 April 2026:
- 21 and over (NLW): £12.71 per hour
- 18 to 20: £10.85 per hour
- Under 18: £8.00 per hour
Minimum wage is assessed in each pay reference period, which cannot exceed one calendar month. Allocate countable commission and deferred pay correctly before comparing pay with hours; a simple annual average cannot establish compliance. This tool does not calculate statutory salaried-hours adjustments or deductions.
Employers who underpay can face penalties of up to 200% of the arrears owed, capped at £20,000 per worker. Workers who suspect underpayment should contact the Pay and Work Rights Helpline on GOV.UK.
Frequently asked questions
How is sales commission taxed in the UK?
Sales commission is treated as standard employment income and taxed as the top slice of your earnings through PAYE. In England, Wales, and Northern Ireland for 2026/27, commission is subject to your marginal tax rate (20% basic, 40% higher, or 45% additional) plus Employee National Insurance (8% on earnings up to £50,270, 2% above). A basic-rate earner keeps ~72% of gross commission, while a higher-rate earner keeps ~58%.
Why did my commission trigger higher tax deductions this month?
PAYE operates on a cumulative basis across each pay reference period. In a month where you receive a large commission payout, HMRC software annualises that single month earnings as if you earn that rate every month, potentially pushing you into the 40% higher tax band for that specific paycheck. Any over-deducted tax is automatically reconciled across subsequent months or at tax year-end.
What is OTE (On-Target Earnings) and is it guaranteed?
OTE (On-Target Earnings) represents your expected total annual earnings if you hit 100% of your performance targets (e.g. £35,000 base salary + £25,000 target commission = £60,000 OTE). Commission is rarely guaranteed unless contractually agreed as a draw or guaranteed period; only your base salary is guaranteed.
Does commission count towards minimum wage?
Yes. Commission counts as pay but must be allocated to the correct pay reference period. When earned in one period and paid in the next it can count back to the earlier period, without double counting. Your employer must ensure that your total pay — base salary plus any commission — divided by the hours you worked in that period equals at least the National Minimum Wage for your age group.
What if my commission varies from month to month?
Minimum wage is assessed in each pay reference period, no longer than one calendar month. Count commission in the correct period, including qualifying deferred pay, and count all applicable hours before checking for a shortfall. An annual average does not establish compliance.
What are my employer's obligations for commission-based workers?
Employers must ensure that every worker receives at least the National Minimum Wage in each pay reference period. For commission-based roles, this means monitoring total earnings against hours worked each period. If commission alone or combined with a base salary does not reach the minimum, the employer must make up the difference.
Does regular commission count towards holiday pay in the UK?
Yes. Under UK employment law and legal precedents, regular sales commission must be factored into statutory holiday pay for the first 4 weeks (20 days) of annual leave. Holiday pay cannot be based solely on basic salary if regular commission forms an intrinsic part of your normal remuneration.
How do I raise a complaint if my commission pay is below minimum wage?
If you believe your total pay falls below the National Minimum Wage, contact HMRC's Pay and Work Rights Helpline on 0300 123 1100 or submit a complaint online through GOV.UK. HMRC will investigate confidentially. You may also seek advice from ACAS or Citizens Advice. Employers found to be underpaying can face penalties of up to 200% of the arrears owed.
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