Marginal tax rate calculator

Above £100,000 the £12,570 personal allowance is cut by £1 for every £2 earned, per gov.uk Income Tax rates. So an extra £1 of salary is taxed at 40%, and it also drags 50p of previously tax-free allowance into the 40% band, which costs another 20p. That is 60p of income tax on every extra pound. Add 2% National Insurance and the real rate on that slice is 62%. The allowance is gone by £125,140, and above that the rate falls back to 47%.

The cost depends on the salary band. Below £50,270 in England, Wales and Northern Ireland it is 20% income tax plus 2% National Insurance. Between £100,000 and £125,140 it rises to about 62%, because the personal allowance is being withdrawn, per gov.uk Income Tax rates. Above £125,140 it settles at about 47%. The calculator above gives the figure for a specific salary.

A gross pension contribution reduces adjusted net income pound for pound. Contributing the amount by which salary exceeds £100,000 restores the personal allowance in full, per gov.uk guidance on Income Tax reliefs. Salary sacrifice achieves the same result and also saves employee National Insurance. Contributions attracting tax relief are capped by the pension annual allowance, normally £60,000 a year.

The marginal rate is the tax charged on the next £1 earned. The effective rate is total tax and National Insurance divided by the whole salary, and it is always lower, per gov.uk Income Tax rates, because the first slices of income are taxed at 0% and 20%. On a £110,000 salary, for example, the effective rate is roughly 34%, while the marginal rate on the next pound is about 62%.

Nothing goes wrong at exactly £100,000. The problem is the £25,140 above it, which is the worst value pay in the UK system: 62p of every pound goes in income tax and National Insurance, against 42p just below and 47p just above. Parents lose considerably more, because £100,000 of adjusted net income also ends the 30 free childcare hours and Tax-Free Childcare outright, and that is a cliff edge rather than a taper.

If the bonus falls in the £100,000 to £125,140 band, the answer for most people is yes. A gross pension contribution there attracts 60% income tax relief, so £10,000 in the pension costs about £3,800 of take-home pay, and salary sacrifice saves employee National Insurance on top. The same logic applies between £60,000 and £80,000 if you claim Child Benefit. The trade-off is access: pension money is locked until 55, rising to 57 in 2028.

Your marginal rate is what the next pound costs, not the average across your whole salary. Someone on £110,000 in England pays about 34% of their salary in income tax and National Insurance overall, but 62% on the next pound. The average is what you have paid; the marginal rate is what a pay rise, a bonus or overtime is worth. They are rarely the same number.

A rise is taxed entirely at your marginal rate, because it sits on top of everything you already earn. A £5,000 rise from £48,000 crosses the £50,270 higher rate threshold, so part of it is taxed at 28% and the rest at 42%. Cross £100,000 and 62% of the rise disappears. Student loan repayments take another 9% of the whole rise, and the Child Benefit charge can take more again.

Exactly the amount your adjusted net income sits above £100,000, as a gross contribution. On £115,000 with no other contributions that is £15,000. Because the whole contribution comes out of the 60% band, it saves £9,000 of income tax, so the real cost of putting £15,000 into your pension is about £6,000. Use the calculator above to get the figure for your own salary.

Scotland's version of the trap is steeper. The advanced rate is 45%, so losing 50p of allowance for every extra pound makes the income tax rate 67.5% between £100,000 and £125,140, or 69.5% with National Insurance. Scotland also has a second oddity lower down: the 42% higher rate starts at £43,662, below the £50,270 National Insurance upper earnings limit, so pay between those two figures is charged at 50%, and the marginal rate then falls to 44% above £50,270.

Yes, if you claim it and your adjusted net income is between £60,000 and £80,000. The High Income Child Benefit Charge takes back 1% of your Child Benefit for every £200 over £60,000, which works out at roughly 7p in the pound for one child, 12p for two and 16p for three. On top of 40% tax and 2% National Insurance, a parent of three in that band keeps only about 42p of each extra pound.