How Much of My NHS Overtime Do I Keep After Tax?

Picking up extra shifts is one of the main ways NHS staff boost their income, but the result on payday can be disappointing. Overtime is not taxed at a special rate. It just sits on top of your normal salary, so every pound of it is taxed at your highest rate. Here is what that means in practice.

How overtime is taxed

Your tax-free allowance and lower tax bands are already used up by your normal salary. So overtime is taxed at:

• 20% income tax plus 8% National Insurance if you are a basic rate taxpayer
• 40% income tax plus 2% National Insurance if you are a higher rate taxpayer

If you have a student loan, another 9% (or 6% for a postgraduate loan) comes off once you are above the threshold.

Overtime is not pensionable for full-time staff

For full-time staff, overtime is not pensionable. No pension contribution is taken from it, and it does not add to your NHS Pension. Part-time staff working extra hours up to 37.5 a week are different: those extra hours are pensionable.

Worked example: Band 5

A full-time Band 5 on the middle pay point (£34,592) works 12 hours of overtime a month at time and a half.

• Gross overtime: £318.44 a month
• Kept after tax and National Insurance: £229.27 a month

That is about 72% of the overtime.

Worked example: Band 7

A full-time Band 7 on the middle pay point (£51,932) works the same 12 hours at time and a half.

• Gross overtime: £478.06 a month
• Kept after tax and National Insurance: £277.27 a month

That is only about 58%, because a Band 7 salary is already above the higher rate threshold.

Why one month can look worse

Payroll works out tax month by month. In a month with a lot of overtime, more of your pay may fall into the higher rate band for that month, even if your yearly income stays below it. It usually balances out over the tax year through your tax code.

Bands 8a and above

Staff in Bands 8a and above are not normally paid for overtime under Agenda for Change. Extra hours may be given back as time off in lieu, or paid under local arrangements. Bank shifts are a different contract and are paid separately.

Overtime versus bank shifts

Bank shifts are often at plain time plus unsocial hours enhancements, while overtime is at time and a half. On the other hand, bank work through a separate contract may be taxed under a different code. The bank job tax guide explains how that works.

Is overtime worth it?

That depends on your circumstances. A basic rate taxpayer keeps about 72p of every overtime pound, which is a good hourly rate for many people. Above the higher rate threshold, you keep around 58p, which may make extra shifts less attractive than time off. If you have a Plan 2 or Plan 5 student loan, another 9p goes on repayments.

Common questions

Does overtime affect tax credits or Universal Credit? Yes. Universal Credit is based on what you are paid each month, so a month with a lot of overtime can reduce your award.

Is overtime included in holiday pay? Regular overtime that you are required to work should be reflected in holiday pay. Voluntary overtime that is regular may also count, depending on the pattern. This is an area where trusts' policies have been updated after legal cases, so ask payroll if you work overtime often.

Can overtime push me into the 60% tax trap? Only if your income goes above £100,000, where your tax-free allowance is gradually withdrawn. This mainly affects consultants and senior managers.

Common mistakes to avoid

• Comparing gross overtime pay with take-home pay from a different job.
• Forgetting that overtime is not pensionable for full-time staff.

A quick rule of thumb

For a quick estimate without a calculator: a basic rate taxpayer keeps about 72% of overtime, a higher rate taxpayer about 58%, and anyone with a Plan 2 or Plan 5 student loan should take off roughly another 9%.

See what you keep

The overtime take-home calculator works out how much of your overtime you keep each month after tax, National Insurance and student loan, for any band, number of hours and overtime rate.