Marginal tax rate
The rate of tax you pay on the next £1 of income you receive. Keep in mind that your marginal tax rate will be higher than the actual amount of tax you pay as a percentage of your overall income.
For example, in the UK most taxpayers have a tax-free personal allowance of £12,570. On this first band of earnings, you’ll pay no income tax. On the next band (£12,571 to £50,270) you’ll pay 20% – then 40%, then 45% on your next bands of earnings.
So, someone earning £60,000 will have a marginal tax rate of 40%, even though they won’t pay 40% on the whole of their earnings.
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