Marginal Tax Rate

An individual’s marginal tax rate is the overall amount of tax levied on their total taxable income. In the UK, for example, income is taxed for the 2021-22 tax year at increasing levels through a system of bands. There is a tax free allowance of £12,570, after which income tax is levied at 20% up to £50,270, 40% up to £150,000, and at 45% above £150,000. Hence an individual earning £100,000 pays £27,432 in tax; a marginal tax rate of 27.432%.