What is your effective tax rate?
The term effective tax rate refers to the average rate at which an individual or a corporation is taxed.
It’s calculated by dividing the total amount of taxes paid by the total taxable income, giving a percentage that represents the average taxation level.
The effective tax rate provides a more accurate reflection of the tax burden on the income or profit of the person or entity than the marginal tax rate , which only applies to the highest bracket of income taxed at its specific rate.
To calculate your effective tax rate for a financial year find the total amount of income tax paid in the financial year and the total taxable income declared.
With both figures apply them to the following formula:
\frac{\text{Total Income Tax Paid}}{\text{Total Taxable Income}} \times 100
Alternatively, you can use the following calculator to help determine what your effective tax rate is. At the moment the default tax rates applied in the table below are for the 2023/24 financial year, but you can amend these values for previous and subsequent years.
