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Marginal rate calculation examples

Marginal relief

Your tax is worked out to see if you benefit from marginal relief.

Calculating your tax bill

Summary of tax calculation

  • if your income in the year is below the total of the exemption threshold and any other tax deductions you won't pay tax
  • if your income is over the total of the exemption threshold and any other deductions you'll pay tax but if the marginal rate is calculation is in your favour, you'll pay less than 20% on your total income
  • you'll never pay more than 20% personal tax on your total income in the year

2019 tax exemption thresholds and deductions

2018 tax exemption thresholds and deductions

Example tax calculations for a single person

Standard tax calculation​
Marginal tax calculation​
​Income
​£20,000
​Income
​£20,000
Less: exemption threshold​​£14,900
​Taxable income =
​£20,000
​Taxable income =
​£5,100
​Tax at 20% =
​£4,000
​Tax calculation at 26% =
​£1,326
​The amount of tax due is the lower calculation = £1,326. This means you would pay around 6.7% tax on your total income.






​Standard tax calculation
​Marginal tax calculation
​Income
​£70,000
​Income
​£70,000


​Less: exemption threshold
​£14,900
​Taxable income =
​£70,000
​Taxable income =
​£55,100
​Tax at 20% =
£14,000​
​Tax at 26% =
​£14,326
​The amount of tax is the lower calculation = £14,000. This means you will pay 20% tax on your total income.




Example tax calculations ​for a married couple

​Standard tax calculation
​Marginal tax calculation
​Income (one spouse not working)
​£35,000
​Income (one spouse not working)
​£35,000
​Less: exemption threshold
​£23,950


​Less: 1 child allowance
​£3,000
​Taxable income =
​£35,000
​Taxable income =
​£8,050
​Tax at 20% =
​£7,000
​Tax at 26% =
​£2,093
​The amount of tax is the lower calculation = £2,093. This means you will pay around 6% tax on your total income.

 

​Standard tax calculation
​Marginal tax calculation
​Income (one spouse not working)
​£125,000
​Income (one spouse not working)
​£125,000

​Less: exemption threshold
​£23,950


​Less: 1 child allowance
​£3,000
​Taxable income =
​£125,000
​Taxable income = 
​£98,050
​Tax at 20% =
​£25,000
​Tax at 26% =
​£25,493
​The amount of tax is the lower calculation = £25,000. This means you will pay 20% tax on your total income.


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