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Marginal Tax Rate

The marginal tax rate (MTR) is the rate of tax on the next £1 of income. All workers in the United Kingdom are entitled to earn a personal allowance of £12,500 before they are charged income tax. The basic marginal rate of 20 percent applies to income between 12.5 and 50 thousand pounds, with a higher marginal rate of 40 percent charged on incomes that are between 50 and 150 thousand pounds. There is also an additional marginal rate for earnings over 150 thousand pounds which has a tax rate of 45 percent. Higher marginal rates make the UK income tax system progressive in that households on higher incomes pay a higher average rate of tax.

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