Marginal deduction: why it can exceed 40%

This page explains the practical difference between PAYE marginal bands and the combined marginal deduction on extra income. It is an estimate-focused explainer for 2026 planning.

Open the calculator Marginal vs effective guide

A practical rule

Marginal deduction ≈ PAYE + USC + PRSI

PAYE is only one part of what reduces take-home pay. USC and PRSI can apply at the same time, so the combined marginal deduction can exceed the PAYE marginal band.

How to use this in planning

Use marginal thinking for overtime, bonuses, and salary negotiations.
Use effective rate for budgeting across the whole year.
Compare monthly and annual views to avoid overreacting to one payslip.

FAQ

Is my marginal rate the same as my tax bracket?

Not always. Your PAYE marginal band might be 40%, but the marginal deduction on the next euro can also include USC and PRSI, so the combined deduction can be higher than the PAYE band alone.

Why does my marginal deduction exceed 40%?

Because multiple charges apply at once. In many scenarios the next euro is charged PAYE at 40% plus a USC rate plus PRSI, so the total can exceed 40%.

What is the difference between marginal and effective rate?

Marginal is the deduction on the next euro of income. Effective rate is the total deductions across the whole year divided by gross income. Effective rate is usually lower than the marginal rate.

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