The rate of tax paid on extra units of income. An individual may pay no tax on the first £ 1000 of income, and 50 per cent tax on all pounds earned thereafter. Those individuals earning more than £ 1000 will thus face a marginal tax rate of 50 per cent even though their overall tax rate will be less than 50 per cent. Someone earning £ 1001, for example, will only pay 50p of tax - a tiny proportion of his total income. Assessment on feasibility of one activity depends not on the tax paid on incremental pounds of earnings, but on tax paid on all actual earnings.
