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Marginal relief explained

Marginal relief

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

Calculating your tax bill

The marginal tax calculation

Exempt from tax

If your income is below the total of your tax exemption threshold and any other tax deductions you won't pay any tax.

Paying tax at the marginal rate

If your income is over the total of the exemption threshold and any other deductions you'll pay tax but you'll get marginal relief if the marginal rate calculation works out less than the standard rate calculation. You'll get less marginal relief as your income increases. 

Maximum tax rate

You'll never pay more than 20% personal tax on your total income in the year.

2020 tax exemption thresholds and deductions

2019 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. Marginal relief is £2,674.






​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. There is no marginal relief.




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. Marginal relief is £4,907.

 

​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. There is no marginal relief.


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