Overtime pay calculator, 2026/27

How this is calculated

The calculator first computes annual income tax and employee National Insurance on the base salary alone, then again with the overtime pay added, using the 2026/27 personal allowance of £12,570, basic rate band of £37,700 and NI thresholds of £12,570 and £50,270. The difference between the two figures is the marginal tax and NI on the overtime itself, which is usually higher than the average rate on the whole salary because the extra pay sits on top of existing earnings.

Employer NI is calculated the same way, comparing the employer's National Insurance bill with and without the overtime, using the 15% rate above the £5,000 secondary threshold for 2026/27. This shows the true cost to the business of authorising extra hours, not just the headline hourly rate.

Why overtime take-home looks lower than expected

Because overtime is paid alongside a normal month's salary, HMRC's PAYE system taxes it as if that higher monthly amount continued for the rest of the year, so a chunk of overtime pay can fall into a higher marginal band even if the employee's annual income stays modest. This corrects itself at year end through the P60 and any tax code adjustment, but it explains why a payslip in a heavy overtime month feels disappointing.

For employees close to the £50,270 higher rate threshold, or the £100,000 personal allowance taper, overtime hours can tip income into a materially higher marginal tax rate, which is worth flagging before agreeing extra shifts.

What directors should consider

Regularly worked overtime can affect statutory payments such as SMP, SPP and SSP because these are based on average weekly earnings, so consistent overtime genuinely increases entitlement, while occasional one-off overtime has less effect. Employers should also check whether overtime pushes total pay above the National Minimum Wage requirements are still met once averaged across all hours worked, particularly for lower-paid roles.

From a cash flow perspective, the employer NI shown above is a real, immediate cost that should be budgeted for whenever overtime is approved, not an afterthought at year end.

Is overtime taxed at a higher rate than normal pay?

Not technically, but PAYE taxes each pay period as if it repeated all year, so a month with heavy overtime can be taxed at a higher marginal rate than usual. Any overpayment is normally corrected by the following payslip or at year end.

Do employers have to pay National Insurance on overtime?

Yes. Overtime is treated exactly like normal salary for employer NI purposes, so it is charged at 15% above the 2026/27 secondary threshold of £5,000, in addition to the employee's own NI deduction.

Does overtime count towards pension contributions?

Under most auto-enrolment schemes, overtime pay is included in qualifying earnings, so both employee and employer pension contributions usually apply to it as well as to basic salary.

Can overtime affect eligibility for statutory sick or maternity pay?

Yes, because these are calculated from average weekly earnings over a set reference period. Regular overtime raises the average and can increase statutory pay, while a one-off overtime shift has minimal effect.