Marginal Tax Rates & Take‑Home Income

General

• The graphs are rendered for incomes from £0 up to £150,000 in £10 increments.
• Everything is based on living in England. If living outside England, assume it does not apply.
• The numbers are for the tax year 6 April 2025 - 5 April 2026.
• The page takes into account Income Tax (including the High Income Child Benefit Charge, which reduces your Child Benefit award, but is assessed by law as Income Tax), Employee's National Insurance Contributions, Child Benefit, Universal Credit, the Personal Allowance withdrawal, and pension contributions.
• You can choose whether you want to take into account Employer's NICs. This affects marginal tax rates in that if an employer gives you a £100 pay increase it really costs them £115 with national insurance. (They're probably also paying a pension contribution, but their pension contribution is ignored for the purposes of this page.) Therefore, if you take-home £72 after NI & IT, and lose £39.60 in UC, you received an additional £32.40 of £115, so the government took 71.826% away.
  
  'Include' and 'exclude' approaches both make sense: if you're offered a £2,000 payrise for more responsibility/hours, the amount your employer pays to the government on top of that doesn't change the answer to "is the extra work worth your while?" OTOH, the £300 in NICs they're paying is money that could have been paid to you, so I give the option to include it as marginal tax.
• Pension contributions do not attract income tax, and are not considered to be income for the purpose of reducing Universal Credit or Child Benefit awards. For the purposes of this page, I include pension contributions within your take-home pay, even though you won't touch them until retirement. It would probably be reasonable to discount their value by some % to take into account the restrictions on them, however for simplicity's sake I value them at their full nominal value and include them within your take-home.
• Pension contributions over £60k/year attract 40% tax, so the page will cap contributions at that amount when relevant. (There are further complications for incomes over £200k, but this page cuts off at gross incomes of £150k, so this is not relevant.)
• Numbers assume one income from employment for a given household. If two people work, or income is from dividends (etc.), different calculations would be required. Monthly fluctuations in income also affect things, but this page assumes your salary is equal throughout the year.
• The page also assumes a single-family model of one or two adults and zero or more children (children being up to age 18 and in full-time education). Outside of these assumptions different rules may apply

Universal Credit

• You can specify whether you claim Universal Credit. Universal Credit can only be claimed if you have less than £16,000 in capital. For every £250 of capital over £6,000, £52.20/year tariff income is imputed. This means that benefits claimants are incentivised to keep less than £6,000 in capital at all times. For the purposes of this page, tariff income is ignored.
• Universal Credit pays a fixed allowance of £300-£400/month per single adult or couple, plus allowances per child. This is included within the take-home here. Since rents are typically much higher than these allowances (especially in London), if you don't have children and are not renting then the amount of salary exposed to high marginal rates due to UC will be small.
• Universal Credit is withdrawn at a rate of 55% of your net pay (and 100% of any unearned income, although this is disregarded for the purposes of this page). This is a primary source of 'marginal tax'.
• Universal Credit will pay your rent. For owners, it will pay ONLY certain service charges and the rent portion of part-own, part-rent schemes: it does not pay mortgages, nor rent to family members. The amount of rent it will pay is capped based on 30th percentile rates in the year to October 2023 for your specified Broad Rental Market Area (BRMA) and your bedroom eligibility. Most claimants pay higher rents than the Local Housing Allowance value. Residents of social housing are likely paying less than the LHA entitlement, since social housing is typically cheaper than commercial rents. You can specify your monthly rent: if it's less than the LHA (which will auto-populate), then your benefits entitlement will reduce accordingly. If more, nothing will happen.
• A BRMA is a mapped, contiguous geographical area. For example, the 'Guildford' BRMA consists of areas surrounding the towns of Woking, Guildford, Cranleigh and Haslemere, and is comprised of specified postcodes in parts of the Chichester, East Hampshire, Guildford, Surrey Heath, Waverley, and Woking council areas. You can find your BRMA at https://lha-direct.voa.gov.uk/.
• LHA bedroom eligibility is one bedroom per adult couple or single child/adult aged 16+, every two children of the same sex aged 10+ must share and also two opposite sex children both aged 0-9; if not pairable, the child gets their own bedroom. There are five LHA rates: shared house (for single adults aged under 35), and one, two, three, and four+ bedrooms. Example: a couple/single-parent with two opposite-sex teenage children would be entitled to the 3-bed LHA rate. If they were in fact renting a 4- or 5-bed house, market forces mean they are likely pay far more in rent, but will receive no more than the 3-bed rate.
• The so-called bedroom tax (14%/25% reduction for 1/2+ extra bedrooms) only applies if renting social housing, not private rents. Bedroom tax is irrelevant to this page.
• This page will guess your bedroom entitlement. You can override its guesses. For example, a couple is most likely entitled to one bedroom LHA. However, they could theoretically be entitled to four-bedroom if both are disabled and have separate overnight carers. For this reason, you can increase the bedroom entitlement from the dropdown.
• There is no hard cap on the size of income you can earn and still claim Universal Credit: everyone without excessive capital is provisionally entitled to UC, and depending on children, LHA, etc., your entitlement will vary, reducing by 55% until at some point it reaches zero, which could be at a salary of more than £100k (at which point the monthly payment of your salary is likely to cause excess capital issues (exceeding £6k and/or 16k). Receiving UC has advantages such as gaining cheap/free admission to tourist attractions. There is a line on the graph to show the salary at which your UC entitlement will reach zero.
• There is a benefit cap. This, in effect, reduces the value of your Universal Credit claim (UC childcare is not affected by the cap) such that Universal Credit + Child Benefit (along with JSA, ESA, etc.) is equal to the cap (Universal Credit will not go below 0), unless you earn £10,704 a year or more (£17,244 in a couple) (the 'Administrative Earnings Threshold').
• If you are disabled or have disabled children, the benefit cap does not apply. The benefit cap means your take-home can increase by thousands of pounds with a 1p income increase (i.e. from £10703.99 to £10704 for a single person). This means extremely high negative marginal tax rates. Due to the distorting effect in the graph, for cases where your take-home income increases as you exceed the AET (common if you have children), I show the marginal rate as -100%, even though in reality it could be much higher.
• If you earn less than the AET, you will have to prove to the JobCentre that you are looking for (more) work (not required if disabled). This doesn't affect your marginal rate, and there are no hard limits on the number of months/years you can earn below the AET while looking for work.

Childcare

Pre-school childcare

• Children aged 3 and 4 have a universal entitlement to 570 hours of free education/childcare per year (typically 15 hours x 38 weeks a year, over three terms). This is not means-tested, nor is it related to working or benefits status, and is listed here for informational purposes only.
• There is a further "working-parent entitlement" of 570 hours free childcare for children aged 9 months to 4 years, thus 1140 hours (with the universal entitlement) for children aged 3 to 4, and 570 for those aged 9 to 35 months. From September 2025, the scheme will be expanded to offer 1140 hours for age 9-35 months.
• Where a 3- or 4-year-old child attends a state-funded nursery or primary school, the education is free at the point of use, regardless of parental income. On the other hand, 3- and 4-year-old children might also/instead attend a childminder or a private school, which charge fees, and in this case the government will pay all/part of the bill.
• You must earn at least the equivalent of of 16 hours per week of the NMW for your age to claim w-p childcare: £10158.72/year if aged 21+; there are NO limits on capital, but if either partner exceeds the upper income limit of £100k (net of pension contributions but gross of IT/NI), it's lost entirely.
• The "disadvantaged parent" scheme offers employed and unemployed UC claimants with gross income <£15,400 570 hours free childcare for 2-year olds, but doesn't cover children aged 9-23 or 36-59 months. It's mutually exclusive with "working-parent".
• Working/disadvantaged-parent childcare costs are set per council. For example, in Islington providers receive £14.15/hour for children aged 9-23 months, £11.06 for 24-35 months, and £8.10 for 36-59 months. From September 2025, working-parent cc is therefore worth £16131/year (1140*£14.15) for a child aged 9-23 months in Islington.

0-16 childcare

• Universal Credit pays 85% of your childcare costs (for children up to end of Y11 secondary school), if you are working, to a maximum net award of £12,382.56/year for 1 child, or £21227.28/year for 2+ children. If you work only 4 hours a week but claim for 40 hours, the DWP is unlikely to pay the full amount. This page does not attempt to analyse whether a claim for childcare is likely to be allowed (e.g., if you enter childcare costs of £20,000 then it will allow it.)
• Tax-free Childcare is an alternative to UC (you cannot claim it with UC): the goverment pays 20% of your childcare costs, to a max of £2,000 awarded per child per year (£4,000 if child is disabled). T-f CC cannot be claimed beyond Y6 (primary school), unless your child is disabled (then Y11). Like w-p childcare, t-f cc is lost all-at-once when either partner exceeds £100k of adjusted income.
• TF CC and UC are administered differently. UC childcare is part of your UC award, and may be considered "income". TF CC is on the other hand paid into a childcare "account", as a bonus, and is not treated as income.
• TF CC or UC cc can be combined with working/disadvantaged-parent free childcare. E.g., if your 2-year-old child attends 1000 hours, getting 570 free for w-p cc, UC would pay for 365.5 (85%) of the remaining 430 hours, while T-f CC would pay only 86 (20%).
• UC/Tax-free/working-parent childcare will not pay childcare costs if you are in a couple and one partner is not working, unless that partner is disabled. This page will treat your specified childcare claim as valid (it will cap support within the schemes' rules). (Disadvantaged parent childcare does not require parents to work.)

Student Loans

• Student loans are sometimes considered to be marginal tax, because they are assessed at a fixed percentage of your income above a certain threshold. There are five different schemes: four different versions of undergraduate schemes, depending on your residence (England, Wales, Scotland, Northern ireland) and year of starting your degree, and one postgraduate scheme. You might have an undergraduate or postgraduate loan, or both. The five schemes differ in terms of interest rates and when they get written off if you haven't paid them off. The write-off principle is what can allow student loans to be deemed marginal tax. As an example, if you spent four years at university, borrowing the largest amount, and after graduating were unemployed/low-paid for many years, you might have a debt in excess of £100,000. Under such conditions, where you are paid an amount just over the repayment threshold (currently between £21,000 and £31,000 per year, depending on the scheme), your repayments are simply "dead money", because your debt never reaches zero, and is eventually written off (write-off dates vary by scheme).
• On the other hand, a graduate who gets, and keeps, a well-paying job will pay off their loan, meaning at some future date they will no longer pay SL contributions. Under these conditions, a student loan is not marginal tax, but simple repayment of a debt.
• This page does not aim to answer whether SL repayments are or are not marginal tax, instead simply allowing you to choose to specify an UG and/or PG loan, and if you do, it will be modelled as "tax", without reference to the level of income (as an example: SL repayments on a £150k salary are almost certainly 'debt repayment', as the SL is likely to be be paid off; however, it's possible that you only work in your highly-paying job for one or two years and therefore it might be 'tax').

Council Tax Reduction

• Council Tax Reduction, sometimes referred to as Council Tax Support, is a valuable benefit, although the government has decided to declassify it from being one. It behaves like a typical means-tested benefit: you lose some or all of it depending on your income and capital (capital ignored for the purposes of this page).
• CTR is distinct from council tax discounts. Students get a 100% c-t discount. Single adults (along with any children in full-time education) get a 25% discount. Some households get a 50% discount. Specify none/25%/50%/100% discount, as applicable.
• CTR is gold-plated for pensioners, by law, with a single set of rules around the country. Each council sets its own rules for people of working age. Particular restrictions (not applicable to pensioners) may include a cap on CTR at Band D (or some other level), even if residing in a more valuable property, and a limit on CTR at no more than 75 or 80% of your CT bill. In addition, CTR may be limited: for example, UC claimants in Leeds who are classed as "jobseekers" will get no CTR beyond six months.
• Typically CTR is awarded in bands (i.e. resulting in big losses in CTR when your income increases by a small amount). I've chosen to use North Yorkshire's CTR 2025-2026 scheme as my model for the entire country. If you are not in North Yorkshire, it won't apply. I've chosen North Yorkshire 2025 scheme because it is one of the most populous areas, and appears to operate a fairly typical scheme.
• North Yorkshire's rules are:
  • you get nothing if you have more than £6k in capital.
  • ignore Child Benefit and disability benefits
  • take net income (gross minus Income Tax & NI but only half of any pension contributions)
  • add Universal Credit including any disability premiums, but NOT housing costs. Example: you are a single adult aged 40, entitled to £400/month in Universal Credit personal allowance, plus £600 for your rent of a 1-bed flat. This gives a £1000 award, before deductions for your earnings. You are employed, earning £20k/year, which (say) reduces your Universal Credit award to £300/month. You are deemed to have a monthly Universal Credit income of (400/1000) * £300 = £120.
  • deduct £25 per week for single people, and £50 for couples or lone parents
  • deduct a further £40 per week if you are disabled or have any disabled children. Note that this is much less generous than the gold-plated pensioner scheme, which disregards £81 per affected person: here it is only one, much smaller, disregard for all
  • This will give you an income for CTR purposes, based on which you will receive CTR of 100%, 75%, 50%, 25% or 0% of your CT liability, depending on income, with income bands different for singles, couples, families with one child, or two+ children.

Other benefits

• PIP (Personal Independence Payment) is two separate benefits for people aged 16 to 77 for "daily living" and "mobility" (which can be exchanged for a Motability car). PIP is not means-tested, and it is disregarded for other benefits. Therefore it is outside this page's scope of "marginal tax".
• DLA (Disability Living Allowance) is for people aged 0-15 (and in some cases 77+). It is essentially the same as PIP, but with different assessment criteria. It's likewise outside this page's scope.
• Attendance Allowance is awarded instead of PIP or DLA when a claim is first made after reach the State Pension age, and is not means-tested and doesn't affect benefts entitlement, so is outside this page's scope.
• Pension Credit and Housing Benefit are only available for pensioners, and are means-tested, but pensioners are outside the scope of this page.
• Employment and Support Allowance is a contributory benefit for people who have paid NICs and are unable to work due to sickness/disability. There are three versions: contribution-based, income-related and new style. ESA provides a NI stamp while not working. It also provides an income, and has no capital limits. Since ESA payments reduce any UC entitlement by the same amount, this page does not consider ESA
• Jobseeker's Allowance is similar to ESA, but is for unemployed people able to work. It can be claimed for no longer than six months. This page does not consider it.
• Carer's Allowance is a means-tested benefit paid if you spend 35 hours a week caring for a disabled person. It is potentially relevant to this page, but is not considered.