Effective tax rate
Total deductions divided by gross pay — the single percentage that summarises the overall tax bite.
The effective tax rate is the proportion of gross pay that does not arrive as net pay. It combines every deduction — income tax, social insurance, any statutory levies — into one number that summarises the total bite.
Because lower bands are taxed at lower rates in every country covered here, the effective rate is always lower than the marginal rate (the rate on the next unit earned). A UK earner on £55,000 has an effective rate of ~22.8% even though their marginal rate is 42%. A US Californian on $80,000 has an effective rate of ~23.6% (federal + state + FICA combined).
Effective rate is the right metric for comparing the overall tax burden of two salaries, two states, or two countries. Each calculator page on this site quotes the effective rate alongside the net figure.
Calculator pages that use this term
See also
- Marginal tax rate — The percentage paid in tax on the next unit of income earned — distinct from the average effective rate.
- Gross pay — The total annual salary before any tax, social-insurance, or pension deductions are taken out.
- Net pay (take-home) — The amount actually deposited in the employee's bank account after every statutory deduction.