What is Marginal Tax Rate? UK Definition 2026/27
Quick Answer
The tax rate you pay on your next pound of income.
Definition of Marginal Tax Rate
Your marginal tax rate is the rate of tax you would pay on your next pound of income. It determines how much extra tax you pay when income increases and how much you save through deductions. In the UK, marginal rates can be 20%, 40%, 45%, or even 60% in the £100k-£125k range due to Personal Allowance taper.
Marginal Tax Rate — Key Facts for 2026/27
| Basic rate | 20% |
| Higher rate | 40% |
| Additional rate | 45% |
| PA taper band | 60% effective |
How Marginal Tax Rate Works — Example
- 1Current income: £105,000
- 2Marginal rate: 60% (PA taper zone)
- 3£10,000 pension contribution
- 4Tax saved: £6,000 (60%)
- 5Compare to 40% zone: Would only save £4,000
How Marginal Tax Rate Affects Your Tax
Understanding your marginal rate is crucial for tax planning. It tells you the real benefit of deductions and the true cost of additional income. The 60% effective rate between £100k-£125k makes pension contributions exceptionally valuable.
Official HMRC Guidance on Marginal Tax Rate
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Income Tax ratesFrequently Asked Questions about Marginal Tax Rate
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.