Your marginal tax rate is the percentage of your next pound of income that goes to income tax + NI. It is different from your average tax rate. In the UK in 2026/27, marginal rates can be 0%, 20%, 28%, 42%, 62%, 47% or higher depending on income band, family situation and student-loan status.
How marginal rate is different from effective rate
The two numbers people confuse:
- Effective tax rate = total tax + NI paid ÷ total gross income. Always averages out below your top band.
- Marginal tax rate = tax + NI charged on the next £1 of income. Always equal to or higher than your effective rate.
On a £50,000 salary the effective rate is about 21%, but the marginal rate is 42% — because the next £1 of pay is taxed at 40% IT + 2% NI. That gap is what makes salary sacrifice and pension contributions so much more powerful at higher incomes than the effective rate suggests.
UK marginal rates by income band (2026/27)
| Income band | Income tax | NI | Combined |
|---|---|---|---|
| £0 – £12,570 | 0% | 0% | 0% |
| £12,571 – £50,270 | 20% | 8% | 28% |
| £50,271 – £100,000 | 40% | 2% | 42% |
| £100,001 – £125,140 (60% trap) | 40% + PA taper | 2% | 62% |
| £125,141+ | 45% | 2% | 47% |
Add 9% on top if you have a Plan 5 student loan above the £25,000 threshold, 6% for postgraduate loan, or up to 11% for parents losing Child Benefit between £60,000 and £80,000 (HICBC). The highest realistic combined marginal rate in the UK system tops out around 71% for high earners with student loans and HICBC.
Why marginal rate matters more than effective rate for decisions
Example: someone earning £100,000 with two children. Effective tax rate ~31%. Marginal rate ~71% (40% IT + 2% NI + 20% PA taper effect + ~10% HICBC clawback). A £5,000 bonus at this position takes home about £1,450 after deductions — but sacrificed into pension, all £5,000 lands in the pot.
The marginal rate calculator shows your exact rate with family circumstances and student loans factored in.
Common mistakes about marginal rate
Find your exact marginal rate
Enter your salary, family situation, pension contributions and student loan to see your real marginal rate — including the bands where it spikes.
Open the marginal rate calculator →Sources and methodology
UK 2026/27 income tax rates and Personal Allowance taper are HMRC's published figures (gov.uk/income-tax-rates). National Insurance rates from gov.uk/national-insurance-rates-letters. HICBC framework from gov.uk/child-benefit-tax-charge. Student loan repayment thresholds and rates from gov.uk/repaying-your-student-loan.
UK Tax Drag is not authorised by the Financial Conduct Authority and does not provide regulated financial advice — see the content disclaimer for the full position. The methodology page documents how every calculator is built and reviewed.
Related
- The 60% tax trap explained — why the marginal rate spikes between £100k and £125,140
- Marginal tax rate calculator — interactive tool with student loan and HICBC factors
- What is adjusted net income? — the trigger for the 60% trap and HICBC
- Should I salary sacrifice? — how marginal rate drives the salary sacrifice decision
- Full UK money glossary
- FAQ library
Marginal vs effective vs headline rate — the three numbers, worked through
People routinely confuse three different percentages, and the confusion costs money. Take someone on a £60,000 salary in England for 2026/27, with no student loan and no children:
- Headline rate — 40%. This is the top income-tax band their salary reaches. It tells you almost nothing about what they actually pay.
- Effective rate — about 23%. Their total income tax is roughly £11,432 (nothing on the first £12,570, 20% on £12,570–£50,270, 40% on the £9,730 above £50,270), plus around £2,994 of National Insurance. Total deductions of roughly £14,400 on £60,000 is an effective rate near 24%. This is the average bite across the whole salary.
- Marginal rate — 42%. The very next £1 they earn is taxed at 40% income tax + 2% NI. This is the only number that matters when deciding whether to take overtime, accept a bonus, or sacrifice into a pension.
The gap between the 24% effective rate and the 42% marginal rate is exactly why a higher earner gets far more from a pension contribution than a basic-rate worker: relief and saved NI are given at the marginal rate, not the average. Quoting your effective rate when making a decision about extra income is the single most common analytical error in personal tax.
How pension and salary sacrifice cut your marginal rate
Pension contributions are the main legitimate lever for pulling income out of a high marginal band. There are two mechanisms, and they behave differently:
- Relief at source (most personal pensions and SIPPs): you pay from taxed income, the provider reclaims 20% basic-rate relief, and you claim any higher- or additional-rate relief through Self Assessment or by asking HMRC to adjust your code. The contribution also extends your basic-rate band, which is the mechanism that reinstates a tapered Personal Allowance.
- Salary sacrifice (a workplace arrangement): you contractually give up gross salary before tax and NI are calculated, so the sacrificed amount never enters your taxable pay at all. This is the more powerful route at high incomes because it also saves the employee NI on the sacrificed slice, and many employers add their saved NI to your pot too.
The same logic clears the HICBC band (£60,000–£80,000) and can lift a Plan 5 student-loan borrower below a repayment trigger. Because the saving is calculated at your marginal rate, the higher your rate, the cheaper the contribution feels in net terms.
Marginal rate in Scotland is different
Everything above describes the rates for England, Wales and Northern Ireland. Scottish taxpayers (anyone whose main home is in Scotland) pay Scottish Income Tax, set by the Scottish Parliament, on non-savings, non-dividend income such as salary. Scotland operates more bands — including a 19% starter rate, a 21% intermediate rate, and higher and top rates above the rest-of-UK equivalents — so a Scottish employee can hit a higher income-tax marginal rate at a lower salary than someone in England.
National Insurance, the £100,000 Personal Allowance taper, HICBC and student loans are UK-wide and are unaffected by where you live, so they stack on top of the Scottish bands in the same way. Savings interest and dividends are also taxed at UK-wide rates everywhere. If you are a Scottish taxpayer, treat the band table above as a rest-of-UK reference and check the Scottish rates separately before acting on a bonus or sacrifice decision.
Overtime, bonuses and the marginal-rate decision
Three practical rules follow directly from understanding your marginal rate:
- Overtime is never “not worth it” in cash terms below £100,000. Even at a 42% marginal rate you keep 58p of every extra £1. The myth that overtime “all goes in tax” comes from confusing the band with the whole pay packet — only the extra slice is taxed at the higher rate.
- Between £100,000 and £125,140, a bonus can genuinely be worth more in your pension than in your bank. At a ~62% marginal rate (or higher with a student loan or HICBC) a £10,000 bonus might net under £3,800 in cash, but the whole £10,000 lands in a pension if sacrificed — a decision that turns on the marginal rate, not the headline 40%.
- A pay rise always leaves you better off. Crossing into a new band only taxes the income above the threshold at the higher rate. There is no point in UK income tax where earning £1 more leaves you with less take-home; the “cliff edges” people fear (HICBC, the £100k childcare cut-off) are about withdrawn benefits, not the income-tax bands themselves.
Use the marginal rate calculator to see your exact rate before saying yes to extra hours or modelling a sacrifice, and the bonus & pay rise calculator to see the cash-versus-pension comparison for a specific lump sum.
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