Tax guide
Not financial or tax advice. Thresholds and rates change by tax year. Use HMRC or a qualified accountant for your situation.
Definition
Your marginal tax rate is the combined effect on the next pound you earn. In the UK that is usually discussed as income tax plus employee National Insurance on earned income, though strictly other rules can apply at specific income levels.
Income tax bands
Above the personal allowance, income tax is charged in bands (basic, higher, additional in England, Wales, and Northern Ireland). Each band has its own percentage. So your marginal income tax rate jumps when you cross a threshold. Scotland uses a different set of bands, so the marginal schedule differs.
National Insurance
Class 1 employee NI has its own thresholds. There is often a lower rate (or zero) below the primary threshold, a main rate on a middle slice of earnings, and sometimes a lower rate above the upper earnings limit. That means your combined marginal rate on salary is not a single flat percentage—it is the sum of the marginal income tax and marginal NI at your current earnings point.
The personal allowance taper
For incomes above £100,000, the personal allowance is withdrawn gradually. In that range, you can face a very high effective marginal rate on each extra pound, because you lose allowance as well as paying tax on the income itself. Our calculator models allowance taper for the selected year so you can see the pattern in outputs, not just in theory.
Marginal vs effective
Do not confuse marginal rate with effective (average) tax rate. The average is always lower than the top marginal slice unless you have almost no allowance left. Both views help: marginal for “what happens if I earn more?”, effective for “what share did I pay overall?”
Combined marginal rates — 2025–26 (England, Wales & N.I.)
The table below shows the combined marginal rate (income tax plus employee National Insurance) at each income band for 2025–26. Scotland has different income tax bands — see the Scottish income tax guide for Scottish marginal rates.
| Gross income band | Marginal IT rate | Marginal NI rate | Combined marginal rate |
|---|---|---|---|
| £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%* | 2% | ~62%* |
| Above £125,140 | 45% | 2% | 47% |
*The 60% effective income tax rate in the £100,001–£125,140 band arises because the £12,570 personal allowance is withdrawn at £1 for every £2 earned above £100,000 — effectively creating an extra 20% rate on top of the 40% higher rate. Source: HMRC 2025–26.
The marginal rate curve
The chart below plots the combined marginal rate (income tax plus employee NI) against gross salary for 2025–26 in England, Wales and Northern Ireland. The spike between £100,000 and £125,140 is the personal allowance taper zone — the "60% trap" — and is visually the tallest feature of the UK marginal rate schedule.
The £100,000 trap in detail
At exactly £100,000 of income, the personal allowance taper begins. For every extra £2 earned, £1 of the £12,570 personal allowance is lost. That lost allowance — which would have been tax-free — is now taxed at 40%. So on each additional pound earned in this band, you pay 40% on that pound plus the equivalent of 20% on the lost allowance: a combined 60% effective income tax rate, plus 2% NI. Salary sacrifice contributions can bring income back below £100,000 and escape this zone entirely.
A worked example: Sarah earns £105,000
Sarah earns £105,000 and is offered a £1,000 pay rise. How much does she actually keep?
At her current income, the £100,000 taper has already reduced her personal allowance from £12,570 to £10,070 (she has lost £2,500 of allowance at £1 per £2 over £100,000). A further £1,000 of pay pushes her to £106,000 and reduces her allowance by another £500, to £9,570.
Here is exactly where the £1,000 pay rise goes:
| Deduction | Amount |
|---|---|
| Higher-rate income tax on the extra £1,000 (40%) | −£400 |
| Higher-rate income tax on £500 of lost personal allowance (40% × £500) | −£200 |
| Employee NI on the extra £1,000 (2% above the upper earnings limit) | −£20 |
| Net kept from the £1,000 pay rise | £380 |
That £620 marginal loss on a £1,000 rise works out at an effective rate of 62% — matching the spike on the chart. Many employers let senior staff divert bonuses or pay rises into pension contributions via salary sacrifice precisely to avoid this zone: if the pre-tax income is routed into a pension before it is counted as income, taxable pay stays below £100,000 and the full personal allowance is preserved.
How the threshold freeze has widened the trap
The £100,000 taper threshold has not moved since it was introduced in 2010 — so while nominal wages have risen, the "trap" now catches many more earners than it was designed to. HMRC figures suggest the number of taxpayers pulled into the taper zone has roughly trebled over the past decade.
The same fiscal-drag effect applies to the core thresholds. The personal allowance (£12,570) and higher-rate threshold (£50,270) have both been frozen since 2021–22. Had they risen with CPI inflation over the four years to 2025–26 — cumulative ~25% — the PA would sit at roughly £15,770 and the higher-rate threshold at around £63,000. The table below estimates the income-tax cost of that freeze at a range of salaries in 2025–26.
| Gross salary | 2025–26 income tax (frozen) | 2025–26 income tax (if uprated) | Extra tax from the freeze |
|---|---|---|---|
| £30,000 | £3,486 | £2,845 | +£641 |
| £45,000 | £6,486 | £5,845 | +£641 |
| £55,000 | £9,432 | £7,845 | +£1,587 |
| £75,000 | £17,432 | £14,227 | +£3,205 |
| £100,000 | £27,432 | £24,227 | +£3,205 |
Income tax only; NI and student loan not included. Uprated scenario assumes ~25% cumulative CPI uprating of both the personal allowance and the higher-rate threshold since 2021–22. The £100,000 taper threshold has been held constant in both scenarios, because it has been frozen since 2010 — uprating it too would widen the gap considerably above £100,000. Figures indicative; individual circumstances vary.
Common questions
What is the marginal tax rate for someone earning £35,000?
At £35,000 the entire salary (above the personal allowance) is in the basic rate band. The combined marginal rate on the next pound earned is 28%: 20% income tax plus 8% employee National Insurance. This remains 28% until income reaches £50,270.
What is the marginal tax rate for someone earning £60,000?
At £60,000, earnings are in the higher rate band. The combined marginal rate on the next pound earned is 42%: 40% income tax plus 2% National Insurance. NI falls to 2% above the upper earnings limit (£50,270).
What marginal rate applies between £100,000 and £125,140?
The effective combined marginal rate is approximately 62% in this zone: 60% effective income tax (40% on the income plus 40% on the equivalent lost personal allowance, equating to an extra 20%) plus 2% NI. This is often called the “60% tax trap”. Pension salary sacrifice is the most common way to reduce income below £100,000 and avoid it.