A persistent belief holds that earning slightly more can leave someone worse off by pushing them into a higher tax band. In a progressive system built on marginal rates, that is not how the calculation works.
Rates apply to slices, not to totals
Income is divided into bands, and each band has its own rate. Income falling within a band is taxed at that band's rate regardless of how much income sits above it.
Crossing a threshold therefore affects only the portion above the threshold. Everything below continues to be taxed exactly as before.
The consequence is that an extra unit of income always leaves more in hand than it costs in tax, because no rate in a progressive schedule reaches the whole amount.
Average and marginal rates differ
The marginal rate is what applies to the next unit earned, and it is the figure people usually quote when describing their tax position.
The average rate is total tax divided by total income, and it is always lower, because it blends the untaxed allowance and the lower bands with the top one.
Confusing the two makes tax appear far heavier than it is, and it distorts decisions about additional work, overtime and pension contributions.
Cliff edges do exist elsewhere
The intuition is not baseless, because some rules genuinely do operate on thresholds rather than slices, and these can produce a real loss from a small increase.
Benefits and allowances that withdraw entirely once income exceeds a limit are the usual culprits, as are charges triggered by crossing a defined level.
Allowances that taper away also create bands where the effective marginal rate is far above the headline rate, which is a genuine distortion within an otherwise smooth system.
Deductions reduce the top slice first
Because bands stack, anything that reduces taxable income removes it from the highest band the taxpayer occupies rather than from the lowest.
This is why a deduction is worth more to someone with higher income, and why the same contribution produces very different savings for two people.
It also explains why timing matters for anyone whose income varies, since the same deduction is worth more in a year when it offsets income taxed at a higher rate.
Why the misconception persists
Payroll systems calculate deductions across the year, so a large one-off payment can be taxed as though that level of income continued, producing an alarming deduction that is later corrected.
Interactions between separate rules also create genuine cases where extra income is barely worth having, and those experiences reinforce a general belief that is otherwise mistaken.
Because band structures, thresholds and taper rules differ substantially between jurisdictions and change frequently, anyone near a threshold should check the current rules that apply to them.