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Marginal Tax Rate

[ˈmɑːʤɪnəl tæks reɪt]



Marginal Tax Rate is the rate of tax an individual pays on the most recent £1 of their taxable income. This exists because of the UK's progressive tax system.

More detail:

The Marginal Tax Rate is the rate of Tax an individual pays on the last £1 of their Taxable Income. The UK has a progressive tax system, which means lower earners pay a lower percentage of tax on income than higher earners.

The amount of Income Tax an individual pays in the UK depends on how much of their income falls into the Personal Allowance and how much of the rest falls into different tax bands. Your Personal Allowance decreases by £1 for every £2 of Adjusted Net Income you earn over £100,000.

For the 2023/24 Tax Year, Basic Rate applies to Taxable Income of £12,571 to £50,270 and is 20%. Higher Rate applies to Taxable Income of £50,271 to £125,140 and is 40%. Additional Tax Rate applies to all Taxable Income above £125,141 and is 45%.

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