Marginal and effective tax rate: what a pay rise really gives you

The difference between your average and your marginal deduction, why some pay rises are worth less than expected, and where the 60 % UK trap sits.

Denne siden er skrevet på engelsk.

Oppdatert 17 October 2026

Two ways to measure the same tax

The effective rate, which Netpay calls the average deduction, is total tax and contributions divided by gross pay. It answers "how much of my salary goes to the state". The marginal rate answers a different question: "how much of the next 100 I earn goes to the state". It is the rate that matters when you consider a raise, overtime or a second job, and it is usually higher than the effective rate.

Why the marginal rate is higher

Allowances and low first brackets pull the effective rate down, because part of your income is taxed at a low rate or not at all. An extra unit of income is taxed in the highest bracket you have reached, and may also be subject to contributions. In Norway, a salary of 660,000 NOK pays 22 % on ordinary income, a further 4 % bracket tax and 7.6 % in national insurance on the next krone, which is about 33.6 %, compared with an average of around 25 %.

Phase-outs create hidden rates

Some benefits shrink as income grows, and that raises the marginal rate beyond the headline rate. In the United Kingdom the Personal Allowance falls by 1 GBP for every 2 GBP above 100,000 GBP. Each extra pound in that band adds 1.50 GBP to taxable income, so the 40 % rate becomes 60 %, plus 2 % National Insurance. A raise from 100,000 to 110,000 GBP raises tax by 6,000 GBP in England, which leaves 4,000 GBP of the 10,000 GBP before National Insurance.

The Netherlands has a similar effect. The general credit is phased out at 6.398 % between 29,736 EUR and 78,426 EUR, and the labour credit at 6.51 % between 45,592 EUR and 132,920 EUR. For salaries between 45,592 EUR and 78,426 EUR, the second bracket of 37.56 % and the two phase-outs add up to about 50 %, which is the same as the top bracket although the nominal rate is lower.

Top rates and thresholds in 2026

Sweden charges a state tax of 20 % above 643,000 SEK of taxable income on top of the municipal tax, so the marginal rate there is about 52 %. Germany reaches 42 % at 69,879 EUR of taxable income and 45 % at 277,826 EUR, with a solidarity surcharge of 5.5 % of the income tax above 20,350 EUR (class I), so the top marginal income tax rate is about 47.5 %. In the Netherlands the top bracket starts at 78,426 EUR with 49.50 %.

How to use the two numbers in Netpay

The calculator shows both numbers under your net salary. Change the salary by a realistic raise and compare the two net figures: the difference is what you keep. The marginal figure is calculated by adding a small amount of gross pay and measuring how the total deductions change, so it includes phase-outs and the effect of contribution ceilings. If a ceiling is passed, the marginal rate falls sharply, as it does in Germany above 69,750 EUR for health insurance.

Kilder

Kalkulator