The loss of an individuals personal allowance (for earners over £100,000) should increase each year with inflation.

Loads of the young consultants are dropping their hours to stop losing the childcare as with 2 toddlers it makes a huge difference just being slightly over

(Predominantly as we don't have the option to salary sacrifice into pensions like most high earners do to get round it

Similar situation in this household - DPs next promotion will take him over 100k - however we don’t want it! Planning another baby, would mean no entitlement to the free childcare vouchers, therefore I’d have to give my part time job up to do it.

The issue we have is that "it's a nice problem to have" or "if you are lucky enough to earn.." all stems from this mystical £100k figure.

If you were hitting a threshold at £64k in 2010 I seriously doubt anyone would be talking about this cliff edge in those sort of terms.

Once you earn over £50,270 your National insurance drops to 2%

so on £100k you’ll pay 2% ni on £49,730. Of your income, instead

OP, I agree it’s annoying. However at that income you should be able to afford some financial advice.
while you’re in the “tax trap” band (I think it’s around 100-140) you can effectively reduce your salary by making high contributions to your pension. When you’re out the other end, you start hitting the pension tax limits on annual allowance (which reduces at 200k) so you will be grateful for those extra £ invested when you were earning £100k.

I think it speaks to a wider philosophy in our country where there isn’t a great motivation to progress in your career though.

i was reading a thread yesterday where benefits (or the loss of) were actively encouraging a couple to work part time and not progress or get better paid jobs and they were really struggling.

Whilst on a much higher salary, this feels similar, the cliff edge is discouraging people from earning over £100k. AND this then impacts women and the gender pay gap because of the loss of free childcare hours and tax free childcare disproportionately affects women (particularly single parents).

I think we all need to care about a government that actively discourages hard work.

All the bands are frozen until 2028 at least anyway.

Is there any realistic prospect of the PA changing earlier? I was under the impression this budget was going to raise taxes, so reversing a previous freeze of the bands that was done 4 years ago seems a little unlikely.

Increasing the PA to £20k is a Reform policy. I’ve just looked and the IFS says this will cost between £50-80 billion, so Reeves is not going to do this.

@Emiliachonk yes it does impact career progression - people in my position (and I imagine @Dueindecemberr’s are facing that choice. I didn’t go part time and instead had squeezed finances for the last 3 years because, sadly, I’m senior in a male environment - if I’d gone to p/t to manage the tax cliff, I absolutely wouldn’t be seen as being serious about my career and my progression would have stalled if not fallen away completely.

The top 1% of earners pay 30% of all income tax, and the top 10% pay 60% - a tax policy that encourages them to lower their earnings and therefore pay less tax I think k should worry us

With the greatest respect, you dont appear to know what you are talking about. Tax liabilities for limited companies are different to those for individuals. Pay dividends to a lower earning spouse / tax written off for company cars, mileage & other expenses. Fundamentally different to paying 60% marginal rate of tax.

I also know plenty of NHS consultants who either go part time, or simply refuse to do any extra work (above the 40hrs per week) - at 40 years old. Just about the most econominally productive age any individual will be. It's mental.

Anyone in the private sector i know earning above 100k puts the entire additional salary into a pension.

So instead of 45% tax on that now, the government gets 20% in 30 years time. Also nuts.

I know a lot of NHS consultants who have part time contracts.
The rest of their time is in the private sector with a business/private company set up.

There are resident/junior docs who work part time because of the work life balance (their working week is 48 hours unlike the 35 hours that most people do)

100%, we always say it's a nice problem to have but it's one of the reasons DH took a demotion recently. The bonus isn't worth the extra hours after tax and loss if childcare. It's counterproductive.

How much extra would the promotion have brought in?

and doesn’t this impact future career development? Negatively

The whole tax system needs reforming - it has far too many of these cliff edges and disincentives.

Id argue they should just scrap the removal of the personal allowance altogether. Wherever it goes, it creates a ‘lump’ of 62% tax on additional income which is… too high and will cause people to take avoiding action (reducing tax revenue for the treasury anyway).

They also should make childcare access universal. Removing it at £100k excludes 2-3% of parents apparently - creating 100%+ tax rates over £100k. I know many families in this situation - and all are putting large amounts in their pensions or moving to part-time work to claim it - because the numbers are so large (even worse now with the loss of 30 hours from 9 months).

For me personally - with a baby and toddler in nursery I basically am no better off on £150k after tax and benefits than on £99k. That shouldn’t really be possible!

You can’t have a sensible discussion about it on here as many can’t see beyond ‘but that’s more than I have so what are you complaining about’.

I’m in the current position where I earn £100k. I’d like to take the next step in my career where I’d earn £130k. It’s basically pointless until my daughter is out of nursery… why would I take on extra stress and responsibilities for barely anything extra (a couple of grand a year when you factor in loss of childcare, personal allowance etc.). It’s absolutely stagnating growth.

This is me. I purposefully work 0.8 AND have not taken a promotion to stay at £99k. The jump up won’t be to £130k so I will have years of earning less.

And I know I will be slated for this, but in the SE, 100k is a very normal salary for people with professional jobs. I am technically senior but have no money left each month after paying a mortgage, activities, bills etc. I am going on mat leave in November and will 100% have to use savings to cover my time off.

That’s a ridiculous statement.

If you earn £99,999 and then have a £1 pay rise you immediately lose 30 hours funded childcare and tax free childcare. That is worth between 7k and 10k per child for the funded hours and an additional 2k per child for tax free childcare.

Now look at your marginal tax rate. You lose your personal allowance between 100k and 125k creating a marginal rate of income tax of 60%. On top of this you need to add NI and also for many people student loan repayment. That creates a marginal tax rate of 71%.

So if you consider someone with young children earning £99,999 getting a £25k pay rise they would pay £17,750 of that increase in tax meaning they keep only £7,250. Out of that £7,250 they now have to pay all of their childcare costs as they no longer qualify for 30 funded hours or tax free childcare. For 1 child this amount will be in excess of the total amount they keep after tax meaning they are worse off than having not had the pay rise.

Would you work hard to earn an additional £25k and be happy to be worse off than not earning it at all? Would you consider them to be “lazy and feckless”?

If you have 2 nursery age children and earn £99,999 you need to earn over 40K extra before you are £1 better off. In those circumstances, earning any salary between £100k and £140k leaves you worse off than if you earn £99,999.

I’d love to know how many people on here who see no issue with the tax system at that level would be happy themselves to work more hours for no pay?

Are lower income earners to go part time to spend time with their children also lazy and feckless?

Of course tax features when making decisions about working hours and conditions. I would earn over £100k if I worked full time but I chose to cut my o hours to 80% FTE and spend the time with my children. The take home pay for the extra day wasn’t worth it for me.

There are articles about this in the papers practically every week: The curse of the £100k salary — readers’ stories

https://www.thetimes.com/article/71f10932-b212-4f12-8df0-bb14b2798bea?shareToken=3e30f4a5d258bcd2c21ffd30f5d3e8a3

its a terrible feature of the tax system and I say that without making a judgement about whether high earners should pay more or less tax. Whatever your view on how the tax burden is distributed, cliff edges like this drive people’s behaviour in an undesirable way.

Yes you still pay tax as a limited company but it’s not as punitive as the £100-£125k tax trap still setting it all up is a faff though.

They can’t avoid the tax by doing private work. It is a myth that accountants can miraculously spirit away tax liability. What is more likely is that they are going private to punch through that dodgy 100-125k earning “pointless area” and get way above that where earnings start to make more sense.

Or doing private work as a limited company to be tax efficient. Higher earners are getting fed up with it.

It’s worse if you’re in Scotland AND a high earner- the Scottish Government hates any sort of aspiration and the politics of envy is strong.
DH put more into his pension instead.

Nobody earning £100k plus is either lazy or feckless. Especially not surgeons 🙄. As you get older you realise time is precious and if you are not remunerated for the skilled and stressful work you do why on earth would you do it? When you could be on a bike ride or spending time with your kids. Stupid shortsighted system.

Before you criticise you need to consider these taxes payers are carrying everyone else.