UK workers working overtime face two questions: How much will I be paid? And how much tax will come off that extra pay? The answers depend on your contract (for the rate), and HMRC's PAYE system (for the tax). Many workers are surprised to discover their overtime pay is taxed at a higher apparent rate, not because overtime is specially taxed, but because the payroll system annualizes the higher month's earnings and applies a proportionally higher bracket. This guide explains both the calculation of overtime pay and the tax implications clearly.
Overtime Pay Formula
Overtime Pay = Overtime Hours × Hourly Rate × Overtime Multiplier
Example: 10 overtime hours at £15/hour with 1.5× rate = 10 × £15 × 1.5 = £225 overtime pay. If no overtime multiplier in your contract, it defaults to plain time (1×).
How UK Overtime Pay Is Calculated
To calculate your hourly rate from a salary, divide your annual salary by your contracted weekly hours, then by 52 (weeks):
Hourly Rate = Annual Salary ÷ (Weekly Contracted Hours × 52)
For example: £36,000 salary, 37.5 hours/week: £36,000 ÷ (37.5 × 52) = £36,000 ÷ 1,950 = £18.46/hour. At 1.5× overtime: £18.46 × 1.5 = £27.69/hour for overtime hours.
| Annual Salary | Weekly Hours | Hourly Rate | 1× Overtime Rate | 1.5× Overtime Rate | 2× Overtime Rate |
|---|---|---|---|---|---|
| £25,000 | 37.5 | £12.82/hr | £12.82/hr | £19.23/hr | £25.64/hr |
| £30,000 | 37.5 | £15.38/hr | £15.38/hr | £23.08/hr | £30.77/hr |
| £36,000 | 37.5 | £18.46/hr | £18.46/hr | £27.69/hr | £36.92/hr |
| £45,000 | 37.5 | £23.08/hr | £23.08/hr | £34.62/hr | £46.15/hr |
| £60,000 | 37.5 | £30.77/hr | £30.77/hr | £46.15/hr | £61.54/hr |
⚠️ Rates are gross (before tax and NI). Overtime multiplier depends on your contract: no legal minimum in UK beyond plain time for NMW compliance.
How Overtime Is Taxed in the UK
Overtime pay is taxed exactly the same as regular pay: through PAYE (Pay As You Earn). There is no special "overtime tax rate." However, in the month you receive overtime, your payroll may temporarily calculate a higher annualized income and apply a proportionally higher rate of tax for that month. This is known as "payroll period annualization."
Example: You normally earn £3,000/month. In October, you earn £4,000 (including £1,000 overtime). Your payroll software annualizes this as £48,000: pushing some of your October income into the Higher Rate bracket temporarily. This means more tax is deducted in October than usual. If your total annual income is below the Higher Rate threshold (£50,270), you'll get a tax refund at the end of the year (or HMRC will adjust your tax code automatically).
| Income Tax Band | Rate Applied to Overtime (2025/26) | NI Rate Applied | Combined Effective Deduction |
|---|---|---|---|
| Basic Rate (income below £50,270) | 20% | 8% | 28% |
| Higher Rate (income £50,271–£125,140) | 40% | 2% | 42% |
| Additional Rate (income above £125,140) | 45% | 2% | 47% |
UK National Minimum Wage and Overtime
UK law requires that total pay across all hours worked (regular + overtime) must average at least the National Living Wage (NLW) or National Minimum Wage (NMW) for your age group. For 2025/26:
| Worker Category | NLW / NMW Rate (2025/26) |
|---|---|
| Age 21 and over (National Living Wage) | £12.21/hour |
| Age 18–20 | £10.00/hour |
| Under 18 | £7.55/hour |
| Apprentices | £7.55/hour |
⚠️ April 2025 NLW/NMW rates. Source: gov.uk/national-minimum-wage-rates. Note: if overtime brings total pay below NLW when averaged across all hours, this is unlawful: even if the contract specifies an unpaid overtime arrangement.
📊 Chart Suggestion: "Bar chart comparing gross overtime pay vs net take-home at different overtime hours (5, 10, 20, 40 hours at £18.46/hr) at 1.5× rate for a £36,000 salary basic rate UK taxpayer. Title: 'UK Overtime: Gross vs Net Take-Home After Tax and NI (2025/26)'"
Frequently Asked Questions
Is there a legal requirement to pay overtime in the UK?
No statutory minimum overtime premium exists in UK law. Employers must only ensure that total pay across all hours worked (including overtime) meets the National Living Wage or National Minimum Wage. Premium rates (1.5×, 2×) are contractual: set by your employment contract or collective agreement. If your contract specifies time-and-a-half for overtime, your employer must pay it, but the law itself doesn't mandate any premium above plain time.
How is overtime taxed in the UK?
Overtime is taxed through PAYE exactly like regular salary: at 20%, 40%, or 45% depending on which income tax band your income falls into, plus National Insurance at 8% (below £50,270) or 2% (above £50,270). In a month where you earn a lot of overtime, more tax may be deducted than usual due to payroll annualization, but this is reconciled at year-end: you won't overpay tax permanently on a one-off overtime spike.
How do I calculate my hourly rate from my annual salary?
Divide your annual salary by your total contracted annual hours: Annual salary ÷ (weekly hours × 52). For a £36,000 salary at 37.5 hours/week: £36,000 ÷ (37.5 × 52) = £36,000 ÷ 1,950 = £18.46/hour. For overtime at 1.5×: £18.46 × 1.5 = £27.69/hour. Use the UK Overtime Calculator to automate this calculation.
What is compulsory vs voluntary overtime in the UK?
Compulsory overtime is overtime your employer can require you to work: typically specified in your contract as "up to X hours per week" or "as required by business needs." Voluntary overtime is additional hours you agree to take on case-by-case without contractual obligation. Both types are treated identically for tax purposes. However, only compulsory overtime hours are likely to count for National Minimum Wage compliance calculations.
Does overtime count toward my pension contributions in the UK?
It depends on your employer's pension scheme. Many auto-enrollment workplace pensions (including NEST) base contributions on "qualifying earnings", which may or may not include overtime depending on scheme rules. Some schemes include overtime in pensionable pay; others base contributions only on basic salary. Check your pension scheme's definition of "pensionable pay" to determine whether your overtime is included. Higher contributions on overtime are typically beneficial from a retirement savings perspective.
Final Thoughts
UK overtime pay is governed primarily by your contract, not statute. Once you know your hourly rate and contract multiplier, the calculation is straightforward, but the tax implications can surprise people who haven't seen PAYE annualization in action before. Remember: if you're a basic rate taxpayer, overtime is taxed at 28% combined (20% income tax + 8% NI), not at a penalty rate. Use the UK Overtime Calculator to get an exact net-of-tax figure for any overtime scenario, and read our UK Income Tax Brackets guide to understand how your annual income level affects the rate applied to every pound you earn: including overtime.
Sources & Citations: Content verified against official guidelines from the IRS (US), HMRC (UK), and ATO (AU). Information is reviewed for accuracy prior to publication.
Free Calculator
Overtime Pay Calculator UK
Calculate your extra UK earnings for working beyond your standard hours. Whether you are paid time-and-a-half, double-time, or a custom multiplier, this tool shows your total gross pay for the period. Perfect for NHS staff, retail workers, and anyone in the UK working varied shifts who wants accurate pay projections.
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