Why is my Bonus Taxed so much?
Marginal Tax Rate
Bonuses are often taxed heavier than your regular salary because they sit on "top" of your income. You don't get an extra tax-free allowance for a bonus. If your regular salary uses up your Personal Allowance and Basic Rate band, your entire bonus might be taxed at 40% or even 45%.
National Insurance
You also pay National Insurance on bonuses. For most employees, this is 8%, but if your total income (including bonus) exceeds £50,270, the rate on the excess drops to 2%.
Student Loans
Student loan repayments (9%) apply to bonuses too. Since a bonus is extra income above the threshold, a significant chunk of it can go towards loan repayment.