Graduates: Marginal Tax Rates

(asked on 1st March 2022) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what the marginal rate of tax, taking student loan repayments into consideration, will be for a graduate earning over £50,270 after the Government's National Insurance rise and changes to the student loan system are implemented.


Answered by
Lucy Frazer Portrait
Lucy Frazer
Secretary of State for Culture, Media and Sport
This question was answered on 9th March 2022

The Health and Social Care Levy introduces a new 1.25 per cent tax. In the 2022-23 tax year this will be collected via a temporary increase to National Insurance contributions (NICs). Revenue raised will be ringfenced to support UK health and social care bodies.

The rate of repayment for student loans remains at 9 per cent on all income above the relevant threshold for Plan 1, Plan 2, and Plan 4 loans. For Post Graduate Loans (PGL) the repayment rate is 6 per cent.

In 2022-23, a graduate employee with earnings of £27,295, excluding a PGL loan, will have a marginal deduction rate of 42.25 per cent. This is made up of Income Tax (20 per cent), NICs (13.25 per cent), and Student Loan deduction (9 per cent).

In contrast, a graduate employee with earnings of £50,270 would have a marginal deduction rate of 52.25 per cent. This is made up of Income Tax (40 per cent), NICs (3.25 per cent), and Student Loan deduction (9 per cent).

Other factors including any reliefs, pension contributions, or receipt of certain means-tested welfare benefits could adjust these marginal deduction rates.

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