How high should I rate a good student for PhD admission? I am a relatively young faculty member. I was asked to provide a reference for a student of mine so he is admitted in a PhD program in Sciences in UK. The student is probably one of the best students I had in a couple of years in terms of academic potential. I firmly believe he will do well as he is bright and hard-working. 

I have to fill in an online form rating him. My problem is that the form's scaling is very strong.
How can I honestly say that someone was outstanding (3%) and not exceptional (1%)? Even the third most positive option is unusually good (rated at 10%) which I feel as a characterization in itself should be strong enough for someone to be at least considered for a PhD.  

My classes are never above 40 to 45 students and I believe that simply "lumping" all the students from my past couple of years in one sample is ineffective and unreasonable. I would probably be unable to single out one of my students as the single best student I've ever had so that I can place him in the top 1% interval with certainty and not top 3%.

As I said, I want to support him and I worry that simply putting him down as outstanding would harm him as other referees might be tempted to "max out" everything. On the other hand simply rating him as exceptional in almost all aspects would be just grade-inflation.

Could someone provide me with some advice on the matter and what they would do? The scaling I have come across before topped at 5% which I found reasonable but here this not the case.
The question of gauging inflation in these situations is both serious and important. It affects peoples' lives!

The difficult task of the letter writer is to visualize what other letter-writers will say, their degree of effusiveness. "Being brutally honest" is obviously stupid and naive to the point of destructiveness.

The operational issue is about achieving the desired effect. And, in particular, if your recommendee is fairly exceptional, it would be a grievous error to praise them "modestly". Yes, the problem is to discriminate between "fairly exceptional" and "exceptional" and "truly exceptional". And these are not things that can be rationally discussed about young people by committees...

Thus, consider the noise in the system into which you put your information...