Marginal vs Effective Tax — and the 60% Trap
The two rates everyone confuses. Calculator shows your effective rate; the explainer below covers when the marginal rate matters more.
Updated May 2026, using HMRC 2026/27 rates and current ONS / gov.uk figures.
Marginal rate is the tax on your next pound. Effective rate is the average across all your pounds. They diverge for two reasons: the tax-free personal allowance pulls the average down, and the £100k allowance taper pushes the marginal rate up to 60%+.
| Salary | Marginal rate (next £1) | Effective rate (whole salary) |
|---|---|---|
| £25,000 | 28% (20% tax + 8% NI) | ~14% |
| £50,000 | 28% | ~21% |
| £60,000 | 42% (40% tax + 2% NI) | ~24% |
| £105,000 | 62% (40% + 20% taper + 2%) | ~30% |
| £130,000 | 47% (45% + 2%) | ~33% |
How it works. Marginal rate = combined tax + NI on the last pound earned. Effective rate = total tax + NI ÷ gross income. The 60% trap is the £100k–£125,140 combined rate of 40% + 20% taper + 2% NI = 62%.
Worked examples
£100,000 → £105,000 rise: marginal 62%, you keep £1,900 of the £5,000 rise.
£60,000 → £65,000 rise: marginal 42%, you keep £2,900 of £5,000.
Pension contribution at £105k income: every £100 sacrificed saves £62 in tax + NI — the 60% trap is also the 60% pension-relief opportunity.
Sources:
HMRC Income Tax rates 2026/27 · HMRC NI rates 2026/27
· retrieved 2026-05-12.
Frequently asked questions
What is the 60% trap?
Between £100,000 and £125,140 of UK income, the personal allowance tapers away by £1 for every £2 of income. Combined with the 40% higher-rate income tax, this creates a 60% effective tax on each pound in this range — before NI. With NI it's 62%.
How can I avoid the 60% trap?
The most common UK strategy is to make pension contributions (via salary sacrifice or relief-at-source + self-assessment reclaim) to keep adjusted net income below £100,000. £100 of pension contribution avoids about £60 of tax. A qualified accountant or tax adviser can advise on your specific situation.
Does the 60% trap apply in Scotland?
Yes — the personal allowance is set by the UK government and tapers above £100k regardless of where you live. Scottish income tax bands are different but the taper effect is the same.
Why is the marginal rate lower above £125k than between £100k and £125k?
Because the personal allowance is fully gone by £125,140 — there's no more taper to apply. Above that, you're back to the additional rate of 45% + 2% NI = 47%.