Marginal income deduction
Your tax is always worked out to see if you benefit from a marginal income deduction. This is the deduction you get from the standard tax rate to reduce your tax bill. The lower your income the bigger the deduction.
It is calculated using a marginal rate of tax.
Calculating your tax bill
The marginal tax rate calculation
Exempt from tax
If your income is below the total of the tax exemption threshold and any other tax deductions you won't pay any tax.
Paying tax with marginal income deduction
If your income is over the total of the exemption threshold and any other deductions you'll pay tax but you'll get a marginal income deduction if the marginal rate calculation works out less than the standard rate calculation.
You'll get a bigger marginal income deduction on a low income and less of a deduction as your income increases until you don't get any marginal income deduction.
Maximum tax rate
You'll never pay more than 20% personal tax on your total income in the year.
2025 tax allowances and deductions
2024 tax allowances and deductions
Tax calculator
Use our tax calculator to work out your tax and see how the marginal rate tax calculation works.
Tax calculator
Example marginal rate tax calculations
Income
| £25,000
| Income
| £25,000
|
| | | Less: exemption threshold | £20,700
|
Taxable income =
| £25,000
| Taxable income =
| £4,300
|
Tax at 20% =
| £5,000
| Marginal rate tax calculation at 26% =
| £1,118
|
Income
| £95,000
| Income
| £95,000
|
|
| Less: exemption threshold
| £20,700
|
Taxable income =
| £95,000
| Taxable income =
| £74,300
|
Tax at 20% =
| £19,000
| Marginal rate tax calculation at 26% =
| £19,318
|
Independent Taxation
For independently taxed spouses or civil partners, tax is calculated on their own income. They each receive their own allowance and have their own tax calculation.
Independent Taxation
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