Commission tax under PAYE feels brutal in a big month. Here is how cumulative PAYE actually taxes commission, why it over-deducts, and when it evens out.
You hit target, the commission lands, and then the payslip arrives looking like HMRC helped itself to a much bigger slice than you expected. The gross figure is brilliant. The net figure is deflating. Every commission earner I speak to has the same first thought: commission must be taxed more than salary.
It is not. What you are seeing is cumulative PAYE doing exactly what it is designed to do, just in a way that feels punishing in the month the money lands. Here is the mechanism behind commission tax PAYE, why the deduction looks so heavy, and when you get it back.
Commission is ordinary pay. It goes through the same PAYE system as your basic salary, taxed at the same income tax and National Insurance rates, with the tax worked out on your total earnings for the year so far rather than the single payslip in front of you.
That last part is the whole story. PAYE is cumulative. The word “cumulative” is doing all the heavy lifting when a commission cheque makes your take-home look wrong.
Most UK employees are on a cumulative tax code, usually 1257L. Cumulative means that every pay period, payroll looks at two running totals: your pay to date since 6 April, and the slice of your tax-free personal allowance you have used up to date. It then charges the right tax on the difference and subtracts whatever tax you have already paid this year.
In a steady month that is invisible. You earn the same, you use one twelfth of your £12,570 allowance, you pay the same tax. Nothing jumps.
Then a commission month arrives. Say you earn £30,000 basic, paid monthly, and in month six you land a £6,000 commission on top. Your gross that month is £8,500 instead of £2,500. Cumulative PAYE now sees your year-to-date pay leap, and it taxes that jump in the month it happens.
Here is a normal month first, on tax code 1257L:
Now the commission month, gross £8,500. The extra £6,000 sits on top of pay you have already had, so cumulative PAYE treats most of it as taxable straight away. In basic rate that is 20% income tax, roughly £1,200 on the commission alone, plus National Insurance. Your deduction for that single month can more than quadruple. That is the moment the payslip looks broken.
It is not broken. Over the full tax year your income is £36,000, which sits comfortably inside basic rate. Your correct income tax for the year is 20% of everything above the allowance:
You were always going to pay £4,686. Cumulative PAYE simply front-loaded a chunk of it into the commission month. In the quieter months that follow, your year-to-date pay grows slowly while your allowance keeps being released, so the system charges you less than usual and the earlier over-deduction unwinds. By the end of the year the totals match.
There are two genuinely different situations hiding inside “my commission got hammered”, and they need different responses.
It only looks higher (the common case). Your annual income stays inside one tax band, almost always basic rate. The heavy month is pure cumulative timing. Do nothing and it evens out through your later payslips, or HMRC squares it up after 5 April if anything is left over. This is most commission earners most of the time.
It genuinely is higher (the real case). The commission pushes your total income across a threshold. The higher-rate threshold for 2026/27 is £50,270. Say your basic is £45,000 and you earn £15,000 of commission across the year, taking you to £60,000. The slice above £50,270, which is £9,730, is taxed at 40% rather than 20%. That is £3,892 of income tax on that slice instead of £1,946. The extra is real, not a PAYE illusion, because you have genuinely moved into the higher band.
There is a nastier version of the real case. If your income runs between £100,000 and £125,140, your personal allowance is withdrawn by £1 for every £2 you earn over £100,000. That creates an effective tax rate of around 60% on commission in that band, because you lose tax-free allowance at the same time as paying 40%. High-earning reps who land a big Q4 commission can walk straight into it without realising.
National Insurance behaves a little differently and it is worth knowing. NI is worked out per pay period, not cumulatively. The employee main rate is 8% on earnings between £1,048 and £4,189 a month, and only 2% above £4,189. So in a spike month, the part of your commission above the monthly upper limit is charged NI at just 2%. A big single payment can actually attract slightly less National Insurance than the same money dripped across the year would. It is a small silver lining, but it is one reason the total is rarely as bad as the one scary payslip suggests.
First, work out which case you are in. Add up your basic pay plus expected commission for the year. If the total stays under £50,270, you are in the timing case and the deduction reconciles itself. If it crosses £50,270, or worse £100,000, part of your commission is genuinely taxed at the higher rate.
Then check your tax code, because a wrong code turns a timing wobble into real lost cash until it is fixed:
If you want to legally keep more of a large commission, the strongest move is salary sacrifice into your pension. You ask payroll to pay some or all of the commission into your pension before tax and National Insurance are calculated. Take the £45,000-plus-£15,000 example: sacrifice the £9,730 that would have been taxed at 40% into your pension, and you keep your income under £50,270, save the 40% income tax and 2% NI on that slice now, and the money lands in your pension instead of at HMRC. For anyone brushing the £100,000 taper, bonus and commission sacrifice is the single most effective thing you can do.
Not much changed, and that is the point. The personal allowance is still £12,570 and frozen through April 2028. The higher-rate threshold is still £50,270. The additional-rate threshold and the £100,000 to £125,140 taper are unchanged too. Because these thresholds are frozen while wages rise, more commission earners drift into the higher band each year without any change in the rules, so the “genuinely taxed more” case is getting more common, not less.
National Insurance stayed at the 8% main employee rate and 2% above the upper limit for 2026/27. So the mechanics in this post hold for the current tax year: same allowance, same bands, same cumulative PAYE behaviour that makes a commission month look heavier than it is.
If you want to see what a commission month actually leaves you with, including cumulative PAYE, National Insurance, pension, and salary sacrifice, the NetPay app runs the numbers on your real figures so you can stop guessing from a scary payslip. Free to download.
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No. Commission is taxed at exactly the same income tax and National Insurance rates as your basic salary. It only feels heavier because cumulative PAYE reacts to the sudden jump in one pay period and withholds more up front. If your income for the whole year stays inside basic rate, the extra deduction usually comes back through later payslips.
Cumulative PAYE means payroll works out your tax on your total pay so far this tax year, not just the current month in isolation. When a big commission lands, your year-to-date pay jumps, so the system takes more tax that month. In quieter months afterwards it charges less, so the total across the year is correct.
Most likely cumulative PAYE responding to the spike, or a non-cumulative W1 or M1 code annualising the commission as if you earn it every month. Check your tax code on the HMRC app. If the code is cumulative and your annual income stays in basic rate, the over-deduction reconciles later in the year.
Paying part of it into your pension through salary sacrifice is the cleanest route. The money is taken before income tax and National Insurance are worked out, so you keep more of it, and it is especially powerful if the commission tips you over £50,270 or into the £100,000 allowance taper.
Want to see your actual take-home pay?
NetPay UK works out your real net pay after tax, NI, pension and salary sacrifice, for hourly, shift and variable-income workers. Free to download.
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A note on financial advice: NetPay UK calculates take-home pay based on official HMRC tax rules. This article reflects rules in force at the time of publication (26 July 2026). Tax rules change. For complex situations, consult a qualified UK accountant or visit gov.uk/income-tax.
