Marginal tax rate: how much of the next £1 you keep

Your marginal rate is the share of your next extra pound that goes to income tax, National Insurance and any student loan. For an employee in England, Wales or Northern Ireland in 2026/27 it is 28% on pay between £12,571 and £50,270, so you keep 72p. That rises to 42% above £50,270, and it peaks at 62% between £100,000 and £125,140. A student loan adds a further 9% or 6% on top.

The rate at each pay level

These figures are for employees in England, Wales and Northern Ireland with a standard Personal Allowance, using employee National Insurance category A.

Pay	Income tax	National Insurance	Combined
Up to £12,570	0%	0%	0%
£12,571 to £50,270	20%	8%	28%
£50,271 to £100,000	40%	2%	42%
£100,001 to £125,140	60% (effective)	2%	62%
Over £125,140	45%	2%	47%

Welsh rates are the same totals as English ones for 2026/27. The 60% effective figure in the fourth row comes from the Personal Allowance taper: the allowance falls by £1 for every £2 of adjusted net income above £100,000, so each extra £2 is taxed at 40% and also makes £1 more of your income taxable. The detail is in the £100,000 tax trap.

Student loans add to it

Student loan repayments come out of the same payslip as tax and act like an extra rate. You repay 9% of income over the threshold on Plan 1, 2, 4 or 5, and 6% over the threshold on a Postgraduate Loan. The 2026/27 yearly thresholds are £26,900 (Plan 1), £29,385 (Plan 2), £33,795 (Plan 4), £25,000 (Plan 5) and £21,000 (Postgraduate Loan).

Say you earn £35,000 on Plan 2. Your next £1 is above £29,385, so it faces 20% tax, 8% National Insurance and 9% loan repayment, which is 37%. You keep 63p. On an extra £1,000 of pay you would keep £630. See student loan Plan 2 for how the deductions are worked out.

Scotland

Scottish income tax has more steps. Between £12,571 and £16,537 the rate is 19% (starter), then 20% to £29,526, 21% to £43,662 and 42% from £43,663. With 8% National Insurance until £50,270, the combined rate in the intermediate band is 29%. In the higher band it jumps to 50% until £50,270, then eases to 44% because National Insurance falls to 2%. Higher, advanced and top rate thresholds stay frozen until 2028/29. See Scottish tax codes.

A few salaries compared

On £22,000 with no loan, the next pound faces 28%, so you keep 72p. On £60,000 with a Plan 2 loan, income tax is 40%, National Insurance 2% and the loan 9%, a combined 51%, so you keep 49p. On £110,000 you are in the taper, where the combined rate is 62% before any loan. The figures change if your National Insurance category is not A, if you pay into a pension or if you are paid in Scotland.

Why pay rises can disappoint

A £1,000 rise for someone at 28% leaves £720. If the rise takes you over £50,270, only the part above that line is taxed at the higher rate. People with a student loan keep less again. The pay rise take-home guide works through examples, and the take-home pay calculator shows your own figures.

What lowers the marginal rate

Pension contributions through a net pay arrangement reduce your taxable pay, so the part of your income that would have been taxed at your top rate falls. Salary sacrifice reduces National Insurance too. Both are described in pension tax relief and salary sacrifice. Which arrangement suits you depends on your employer and your own circumstances, so ask your payroll or pensions team for the specifics.

The higher rate tax guide covers the point at which the 40% band begins.