Progressive taxation

Rates that rise in steps as income grows

In detail

Income is split into bands and each higher band carries a higher rate. Only the part above a threshold is taxed at the higher rate, not the whole amount. Salaries are usually taxed this way, while stock gains are often taxed separately at one flat rate regardless of size.

Example

With 10% up to 33,000 and 20% above it, an income of 40,000 is not all taxed at 20%.

Related terms

Taxable income Aggregate versus separate taxation Dividend tax

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For learning, not investment advice. Decisions are your own.