Example
Salary of GBP 50,000 versus GBP 45,000 plus GBP 10,000 bonus
A worked example showing why a package with higher variable pay can still be weaker in spendable-pay terms than it looks on paper.
Scenario
Two offers are on the table:
- Option A: £50,000 salary, no variable pay
- Option B: £45,000 base salary + up to £10,000 target bonus
Option B has a higher total package value of £55,000 at full payout versus £50,000. But after tax, the picture is more nuanced — and if the bonus falls short, Option A can easily win.
Option A: £50,000 salary
Using 2025-26 tax rules:
- Taxable income: £50,000 − £12,570 = £37,430
- Basic rate: £37,430 × 20% = £7,486
- Higher rate: £0 (just within basic-rate band)
- Employee NI: (£50,000 − £12,570) × 8% = £37,430 × 8% = £2,994
- Take-home: £39,520/year (£3,293/month)
Option B: £45,000 base
- Taxable income: £45,000 − £12,570 = £32,430
- Income tax: £32,430 × 20% = £6,486
- Employee NI: £32,430 × 8% = £2,594
- Base take-home: £35,920/year (£2,993/month)
After-tax bonus (at £45,000 base)
At a £45,000 base salary, the remaining basic-rate band is £50,270 − £45,000 = £5,270. The first £5,270 of bonus falls in the basic-rate band; anything above that enters the higher-rate band.
- First £5,270 of bonus: 20% tax + 8% NI = 28% deductions → net: £5,270 × 72% = £3,794
- Remaining £4,730 of bonus (above £50,270): 40% tax + 2% NI = 42% deductions → net: £4,730 × 58% = £2,743
- After-tax bonus (full £10,000): £3,794 + £2,743 = £6,537
Full bonus scenario: total take-home
| | Option A | Option B (full bonus) | |---|---|---| | Base take-home | £39,520 | £35,920 | | After-tax bonus | — | £6,537 | | Total take-home | £39,520 | £42,457 | | Monthly equivalent | £3,293 | £3,538 |
With a full bonus payout, Option B delivers £2,937 more per year than Option A.
What happens at 50% bonus?
If the bonus pays out at half target (£5,000):
- £5,000 of bonus: first £5,270 of remaining basic-rate band covers the lot
- After-tax bonus: £5,000 × 72% = £3,600
- Total take-home: £35,920 + £3,600 = £39,520
At 50% bonus payout, both options produce exactly the same take-home of £39,520. Below 50%, Option A wins.
Risk summary
| Bonus payout | Option A take-home | Option B take-home | Difference | |---|---|---|---| | Full (£10,000) | £39,520 | £42,457 | +£2,937 Option B | | 50% (£5,000) | £39,520 | £39,520 | Break-even | | Zero | £39,520 | £35,920 | +£3,600 Option A |
Verdict
Option B only wins if the bonus pays out above 50% of target. At 50% payout the two options are identical. Below 50%, Option A delivers more guaranteed income. The right choice depends on how reliably the bonus has historically paid out — and whether you can absorb the income risk of Option B in a lean year.
Practical next step
Use the salary vs bonus calculator to model different payout percentages, and the job offer comparison calculator to compare the full packages.
Try the calculators
Run your own numbers through the calculators that connect to this content.
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How to use PayPath here
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