Glossary · UK
What is Marginal Tax Rate?
The tax rate you pay on the next £1 of income — used to evaluate pay rises and pension contributions.
Full Definition
The marginal tax rate is the combined income tax plus NI you would pay on the next £1 of income. In 2026/27 rUK it is 0% below £12,570; 28% between £12,570 and £50,270 (20% + 8% NI); 42% between £50,270 and £100,000 (40% + 2% NI); roughly 62% between £100,000 and £125,140 because of the Personal Allowance taper; and 47% above £125,140. Scotland adds different bands. Marginal rate is the correct number to use when weighing a salary sacrifice into pension, a Gift Aid donation, or whether to take a bonus this year or next.
How Marginal Tax Rate is calculated
Marginal rate = extra tax and NI on the next GBP 1 of income- Basic band
- 20% Income Tax + 8% NI = 28% combined (2026/27, England).
- 100k-125,140 trap
- 60% effective: 40% tax plus the withdrawn Personal Allowance.
Worked example: Earning between GBP 100,000 and GBP 125,140, every extra GBP 1 loses 50p of allowance, so GBP 2 of income is taxed for each GBP 1 of lost allowance, producing an effective 60% marginal rate.