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The United Kingdom has a band of income where the marginal tax rate is 62%: between £100,000 and £125,140 of total income, every extra pound of salary keeps 38 pence. It is not a headline rate and it appears on no tax table. It is the product of a rule that withdraws the personal allowance — £1 of allowance for every £2 of income above £100,000, fully gone at £125,140.
The mechanism matters more than the label. An extra pound of salary does not just pay 40% higher-rate tax; it also removes 50 pence of allowance, so £1.50 becomes taxable at 40% instead of £1.00. That is 60 pence of income tax on the extra pound, plus 2 pence of National Insurance above £50,270 — 62%.
| Total income | Net pay | Effective rate | Marginal (tax) | All-in marginal |
|---|---|---|---|---|
| £90,000 | £62,758 | 30.3% | 40.0% | 42.0% |
| £100,000 | £68,558 | 31.4% | 60.0% | 62.0% |
| £101,000 | £68,938 | 31.7% | 60.0% | 62.0% |
| £110,000 | £72,358 | 34.2% | 60.0% | 62.0% |
| £120,000 | £76,158 | 36.5% | 60.0% | 62.0% |
| £125,000 | £78,058 | 37.6% | 60.0% | 62.0% |
| £130,000 | £80,687 | 37.9% | 45.0% | 47.0% |
| £150,000 | £91,287 | 39.1% | 45.0% | 47.0% |
Three numbers make the cost concrete. Going from £100,000 to £101,000 leaves you £380 better off, not £580. Crossing the whole band, from £100,000 to £125,140, adds £25,140 of gross pay and £9,553 of net pay — an average of 62% across the entire stretch. And the allowance that disappears is worth £5,028 at the 40% rate: £12,570 × 40%.
The rate drops at the top of the band, which surprises people
At £125,140 the allowance is exhausted and the 1.5 multiplier disappears with it. England’s next band is the additional rate of 45%, so the all-in marginal rate falls from 62% to 47% — the only place in the UK system where the marginal rate goes down as income goes up. The extra pound above the threshold is taxed more lightly than the pound below it. That does not mean crossing it is bad; total tax keeps rising, it just rises more slowly from there.
The thresholds are also frozen. The allowance has been held at £12,570 rather than indexed, so as pay rises more people are pulled into the band each year without any change in the law. A salary that was comfortably below £100,000 a few years ago can drift into a 62% marginal rate through pay rises alone.
Scotland reaches 74% in the same band
The personal allowance and its withdrawal are UK-wide, but income tax rates are not: Scotland sets its own bands. The withdrawal is valued at the Scottish rate that applies, so the all-in marginal rate inside the band rises accordingly.
| Total income | Net pay | Effective rate | Marginal (tax) | All-in marginal |
|---|---|---|---|---|
| £100,000 | £65,227 | 34.8% | 67.5% | 69.5% |
| £110,000 | £68,277 | 37.9% | 67.5% | 69.5% |
| £120,000 | £71,181 | 40.7% | 72.0% | 74.0% |
| £125,000 | £72,481 | 42.0% | 72.0% | 74.0% |
| £130,000 | £74,947 | 42.3% | 48.0% | 50.0% |
The same £120,000 earns £76,158 in England and £71,181 in Scotland — a difference of £4,977 a year, and inside the band the marginal rate is 74% against 62%. Scottish taxpayers also reach the additional rate on income alone, without the allowance question, which is why the rate after the band settles at 50% rather than 47%.
What actually reduces it
The band itself cannot be moved, but the allowance can be restored. Anything that reduces your adjusted net income below the taper restores allowance pound for pound: pension contributions (including salary sacrifice through an employer), Gift Aid donations, and certain other reliefs. The point of the 62% band is that this relief is worth 60% rather than 40% — a £5,000 pension contribution is worth £3,000 in income-tax relief inside the band, against £2,000 at the higher rate elsewhere. Taxmora’s strategy layer values pension contributions at your marginal rate for exactly this reason.
- The pension annual allowance is £60,000 (or 100% of earnings, whichever is lower), and it tapers for adjusted income above £260,000 — so the band and the allowance can interact awkwardly at very high incomes.
- Salary sacrifice reduces contractual pay, so it lowers adjusted net income and the employee National Insurance base at the same time; a personal pension contribution reduces income tax and restores the allowance but does not reduce National Insurance.
- A student loan repayment adds a further percentage of everything above its repayment threshold, which pushes the all-in marginal rate in this band above 70% for graduates on Plan 2.
If you are arriving in or leaving the UK
- The FIG regime does not change this band. It exempts foreign income from UK income tax for four years; your UK salary stays fully taxable and the allowance taper applies to it as normal.
- The personal allowance is an annual amount, not a daily one, and it is not pro-rated by the number of days you spend in the UK. What changes on arrival or departure is which income falls in scope, which is the statutory residence test’s question rather than a rate question.
- If you are leaving, the band still applies to your UK-source salary for the part of the year you are resident, so a mid-year departure does not hand back the allowance you have already lost.
What this article does not model
- National Insurance is annualised in our engine. Payroll applies the bands per pay period, so the marginal rate is exact for an annual figure and approximate on a single payslip.
- Pension and Gift Aid relief are shown only as the value of the marginal rate; the mechanics of relief at source and Self Assessment claims are not modelled.
- Marriage allowance, blind person’s allowance and the other small allowances are not modelled, and neither are savings or dividend income (which have their own rates and allowances).
- Split-year residence is not modelled — our statutory residence test gives the year’s answer, not the date-precise split.
Frequently asked questions
- Is 62% a real tax rate?
- It is a real marginal rate, not a headline one. The 40% higher rate applies to £1.50 of extra taxable income because 50p of allowance is withdrawn for every extra pound earned, and above £50,270 employee National Insurance adds 2%. The effective rate at £100,000 is 31.4%, not 62%.
- Why does the rate fall at £125,140?
- Because the allowance is exhausted there, so the 1.5 multiplier disappears. England’s next band is 45% additional rate, which with 2% National Insurance makes 47%. It is the only downward step in the UK marginal rate schedule, and crossing the threshold still leaves you with more money.
- Can I get the allowance back?
- Yes, by reducing adjusted net income: pension contributions, salary sacrifice or Gift Aid bring the allowance back pound for pound. Inside the band the relief is worth 60% rather than 40%, which is what makes the pension move unusually valuable there — subject to the £60,000 annual allowance and its taper above £260,000 adjusted income.
- Does the band apply in Scotland?
- The allowance and its withdrawal do, because they are UK-wide. Scottish rates are higher, so the all-in marginal rate inside the band reaches 74% and a £120,000 salary pays £4,977 less net in Scotland than in England on our figures.
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