How to Calculate Your Marginal Tax Rate

1. How to Calculate Your Marginal Tax Rate Depending on your income, the standard income tax rates in England are 20%, 40%, or 45%. But beyond these headline rates, doctors also need to understand another key concept: the marginal tax rate. It affects how much tax you pay on every extra pound you earn—and can sharply reduce your take-home income once you pass certain thresholds. In this article, we explain what the marginal tax rate is and how to calculate it, as well as how experienced medical accountants can help you manage your tax position more effectively. Understanding the marginal tax rate The percentage of tax you pay on earnings for the next pound you earn is your marginal tax rate. If, for example, your income is £70,000 and there’s an extra pound, you would have to pay 40 pence or 40% of that extra pound in your tax. In this case, the marginal and absolute rates are similar. It sounds simple, but some situations could make the marginal rate unique and more significant. One of the common ways the marginal rate becomes more crucial is when a doctor’s income exceeds £100,000. For instance, if your adjusted net income exceeds that in the 2025/26 tax year, your personal allowance will be reduced by one-half of the extra income beyond £100,000. Why your tax bracket matters

2. Your tax bracket determines your marginal tax rate: 0% for earnings under £12,570 20% when you earn £12,571 to £50,270 40% for earning between £50,271 and £125,140 45% on earnings beyond that. Knowing exactly where your income sits helps you understand how much extra tax you might face if your earnings increase. What counts as adjusted net income? Adjusted net income is your total taxable income minus any gross personal pension contributions and Gift Aid donations made during the tax year. NHS pension contributions are already factored in, along with any employment expenses that qualify for tax relief. Medical accountants often recommend reviewing your claim for allowable expenses carefully, as even small adjustments could help reduce your adjusted net income and protect your personal allowance. How much money can you lose? If your adjusted net income exceeds £100,000, your personal allowance starts to shrink. For every £2 you earn above £100,000, you lose £1 of your allowance. By the time your adjusted net income reaches £125,140, your entire personal allowance is removed. This creates a hidden marginal tax rate of 60% on income between £100,000 and £125,140—not the standard 40% many people expect. Talk to a chartered accountant. Allenby Accountants’ team of specialist medical accountants can help you calculate your true marginal rate and explore relief options to maximise your earnings. To find out more or to book a consultation, call 0208 914 8887 or request a quote via their website.