Bonus Tax Rates Europe 2026

UK bonuses are taxed as employment income under PAYE — at the same income tax rates and NIC rates as salary. A bonus received in a single payroll period may push the payment into a higher tax bracket for that period. HMRC adjusts the tax in subsequent months if the annual calculation results in over/under payment. There is no special bonus tax concession in the UK — unlike Austria (6% flat) or Italy (10% flat on qualifying productivity bonuses).

Austrias EStG §67 provides a 6% flat tax rate on the 13th month (Urlaubsgeld — June) and 14th month (Weihnachtsgeld — November), each equal to one months salary. These are legally mandated for most employees by collective agreement. Instead of the normal 30-50% marginal rate, these two months are taxed at just 6%. At €50.000 annual salary, this saves approximately €2.666/year compared to taxing the additional months at normal rates. Over a 30-year career, this privilege is worth approximately €80.000.

Frances Prime de Partage de la Valeur (PPV) exempts profit-sharing bonuses up to €3.000/year from income tax and social charges. This applies to employer-funded profit-sharing bonuses — not discretionary bonuses. Companies with profit-sharing agreements (intéressement) can exempt up to €6.000. Above these thresholds, the bonus is taxed at full marginal income tax and social charge rates — reaching approximately 49% combined for higher earners.

In most European countries, there is no cap — bonuses are taxed at the marginal rate for the relevant income band. The most punishing effective rates on bonuses: Denmark (55,9%), Belgium (56,5%), Netherlands (49,5%), Ireland (52% above €44.000). Austrias §67 exception allows up to approximately 2× monthly salary per year (the 13th and 14th months) at 6%. For non-§67 eligible bonus amounts in Austria, standard progressive rates apply.

Italys premi di produttività (productivity bonuses) governed by collective labour agreements benefit from a 10% substitute tax instead of the normal IRPEF marginal rate (up to 43%). The concession applies to bonuses linked to measurable productivity, efficiency, or profitability metrics as defined in the CLA. Maximum qualifying bonus: €3.000/year (€4.000 in companies with worker involvement agreements). Companies must have collective agreements in place — available to workers earning up to €80.000 annual gross.