UK Effective Marginal Tax Rates 2026/27: 60% Trap, HICBC, Student Loans
What you keep from each extra £1 in 2026/27: Income Tax, NI, the £100k allowance taper, Child Benefit charge, student loans and Universal Credit stacked.
Effective marginal rate by income 2026/27
The rate on the next £1 of salary for an employee in England, Wales or Northern Ireland with a Plan 2 student loan who claims Child Benefit for two children, with no other income and no pension contributions. Figures are computed from the 2026/27 rates.
| Salary band | Effective marginal rate | Components |
|---|---|---|
| Up to £12,570 | 0% | Nothing due |
| £12,570 to £29,385 | 28% | Income Tax 20% + NI 8% |
| £29,385 to £50,270 | 37% | Income Tax 20% + NI 8% + Plan 2 loan 9% |
| £50,270 to £60,000 | 51% | Income Tax 40% + NI 2% + Plan 2 loan 9% |
| £60,000 to £80,000 | 62.7% | As above + Child Benefit charge on two children (11.7%) |
| £80,000 to £100,000 | 51% | Child Benefit fully clawed back; back to the higher-rate stack |
| £100,000 to £125,140 | 71% | Income Tax 40% + allowance taper 20% + NI 2% + Plan 2 loan 9% |
| Over £125,140 | 56% | Income Tax 45% + NI 2% + Plan 2 loan 9% |
Stacking examples
Employee on £105,000 with a Plan 2 student loan
- Income Tax higher rate: 40%
- Class 1 NI above the Upper Earnings Limit: 2%
- Plan 2 student loan: 9%
- Personal Allowance taper: 20% (50p of allowance lost per £1, taxed at 40%)
- Child Benefit charge: none at this income (fully clawed back at £80,000)
- Total effective marginal rate: 71%
Each extra £1 of salary keeps about 29p.
£70,000 earner claiming Child Benefit for three children, Plan 2 loan
- Income Tax higher rate: 40%
- Class 1 NI: 2%
- Plan 2 student loan: 9%
- Child Benefit for three children: £3,268 a year, clawed back evenly between £60,000 and £80,000, so £3,268 / £20,000 = 16.3% of each extra £1
- Total effective marginal rate: 67.3%
Each extra £1 keeps about 33p. The charge is assessed on the higher earner's adjusted net income, whoever claims the benefit.
£105,000 earner with no children and no student loan
- Income Tax higher rate: 40%
- Class 1 NI: 2%
- Personal Allowance taper: 20%
- Total effective marginal rate: 62%
The "60% trap", plus NI. Each £1 of salary sacrificed into a pension in this band saves 62p of tax and NI.
Universal Credit claimant earning above the Personal Allowance
- Income Tax 20%
- Class 1 NI 8%
- Universal Credit reduces by 55% of earnings after tax and NI: 55% x 72p = 39.6p
- Total effective marginal rate: 67.6%
Applies once earnings are above any work allowance. Below the Personal Allowance and NI threshold the rate is the 55% taper alone.
Sole trader with £30,000 profit and a Plan 5 student loan
- Income Tax 20%
- Class 4 NI 6%
- Plan 5 student loan 9% above £25,000
- Total effective marginal rate: 35%
Self-employed people pay Class 4 at 6% in this band against 8% Class 1 for employees, so the stack is 2 points lower. Plan 5 starts at £25,000 (Plan 2: £29,385).
The 60% trap zone (£100,000 to £125,140)
Employee, no student loan, no Child Benefit.
| Income | Personal Allowance left | Marginal rate on the next £1 (tax + NI) |
|---|---|---|
| £99,999 | £12,570 | 42% |
| £100,000 | £12,570 | 62% |
| £110,000 | £7,570 | 62% |
| £120,000 | £2,570 | 62% |
| £125,140 | £0 | 47% |
Component rates that stack
| Component | Rate | Applies when |
|---|---|---|
| Income Tax basic rate | 20% | £12,571 to £50,270 |
| Income Tax higher rate | 40% | £50,271 to £125,140 |
| Income Tax additional rate | 45% | Above £125,140 |
| Class 1 NI main rate | 8% | £12,570 to £50,270 |
| Class 1 NI upper rate | 2% | Above £50,270 |
| Personal Allowance taper | 20% | £100,000 to £125,140 |
| Child Benefit charge (1% per £200) | 7% to 16.3% for 1 to 3 children | £60,000 to £80,000 |
| Plan 1 student loan | 9% | Above £26,900 |
| Plan 2 student loan | 9% | Above £29,385 |
| Plan 4 student loan (Scotland) | 9% | Above £33,795 |
| Plan 5 student loan | 9% | Above £25,000 |
| Postgraduate Loan | 6% | Above £21,000 |
| Universal Credit taper | 55% of earnings after tax and NI | Above any work allowance |
Related calculators + guides
Frequently asked questions
What is an effective marginal rate and why does it matter?
It is the share of the NEXT pound earned that goes in tax, NI, student loan repayments, benefit clawbacks and withdrawn allowances, not the average rate on your whole income. It is the figure that matters for overtime, bonuses, salary sacrifice, a second job or pension contributions, because a headline 40% rate can hide a much higher combined rate.
What is the 60% tax trap?
Between £100,000 and £125,140 of adjusted net income the £12,570 Personal Allowance falls by £1 for every £2 of income. Each extra £1 is taxed at 40% and also removes 50p of allowance, which is then taxed at 40% (another 20p): 60% Income Tax in total. Add 2% NI for an employee (62%) and 9% for an undergraduate student loan (71%). The Child Benefit charge does not add to it: it is fully clawed back by £80,000.
How does the High Income Child Benefit Charge stack into the marginal rate?
The charge is 1% of the Child Benefit received for every £200 of adjusted net income above £60,000, so all of it is repaid at £80,000. Spread over that £20,000 band, it adds 7% for one child (£1,407 a year), 11.7% for two (£2,337) and 16.3% for three (£3,268). For a higher-rate employee with a Plan 2 loan and three children, that is 67.3% in the band.
Student loan repayments add to marginal rate - by how much?
Plans 1, 2, 4 and 5 take 9% of income above the plan threshold: Plan 1 £26,900, Plan 2 £29,385, Plan 4 (Scotland) £33,795, Plan 5 £25,000. A Postgraduate Loan takes 6% above £21,000, and is repaid at the same time as an undergraduate loan, so the two together add 15% above both thresholds.
How does Universal Credit interact with marginal rate?
Above any work allowance, Universal Credit falls by 55p for each £1 of earnings after Income Tax, NI and pension contributions (Universal Credit Regulations 2013, regs 22 and 55(5)). A claimant paying 20% tax and 8% NI keeps 72p of each extra £1, then loses 39.6p of Universal Credit: 67.6% in total. A claimant below the tax and NI thresholds faces the 55% taper alone.
Can pension contributions reduce my effective marginal rate?
Yes. Salary sacrifice lowers the salary itself, and personal contributions under relief at source are deducted (grossed up) in working out adjusted net income, which is the figure the allowance taper and the Child Benefit charge use. A £105,000 employee sacrificing £5,000 brings adjusted net income back to £100,000 and clears the taper band, saving 62p per £1 (40% tax + 20% taper + 2% NI), before any student loan saving.
Scottish tax bands change the calculation - how?
Scottish rates for non-savings income in 2026/27: starter 19%, basic 20%, intermediate 21%, higher 42% (£43,663 to £75,000), advanced 45%, top 48%. The allowance taper band from £100,000 to £125,140 sits entirely in the 45% advanced rate band, so the taper adds 22.5% and Income Tax alone reaches 67.5%; with 2% NI it is 69.5%, and 78.5% with an undergraduate loan. NI and student loans are the same UK-wide.
Self-employed marginal rates - same as employed?
Income Tax and student loans work the same way. National Insurance differs: employees pay Class 1 at 8% then 2%, while the self-employed pay Class 4 at 6% on profits from £12,570 to £50,270 and 2% above. Class 2 is no longer compulsory: with profits of £7,105 or more it is treated as paid, and below that it can be paid voluntarily at £3.65 a week. So the self-employed stack is 2 points lower in the basic-rate band.
How can I reduce the marginal rate on a bonus?
(1) Pension salary sacrifice of some or all of the bonus, if your employer offers it: it lowers adjusted net income, so in the taper band it saves 62p per £1. (2) Personal pension contributions or Gift Aid donations: both are deducted in working out adjusted net income for the allowance taper and the Child Benefit charge. (3) An electric car through salary sacrifice: the taxable benefit on a zero-emission car is 4% of list price in 2026/27 (HMRC 480 Appendix 2). (4) Cycle to work salary sacrifice, if your employer runs a scheme.
What is the highest effective marginal rate scenario?
Using the rates on this page: (a) an English employee on £105,000 with Plan 2 and Postgraduate loans: 77%. (b) the same in Scotland: 84.5%. (c) an English employee on £70,000 claiming for three children with both loans: 73.3%. (d) a Universal Credit claimant paying basic-rate tax and NI: 67.6%, before any student loan repayment, which is not deducted from earnings for Universal Credit.