To think there is very little benefit in earning more than 50k

[ReallyTired]

Loss of child benefit and now reduction in pension tax relief makes hardly worth bursting a gut to earn over 50k. People who earn just over 50k are generally the work horses in skilled jobs that ecomony needs to grow. Given that such people will be saddled with high student loans in the future, what will senior teachers, doctors gain from all their hard work?

I agree OP. Maybe doesn't apply to everyone especially if you have no choice in your hours. However I work as a GP locum. Because my indemnity works in brackets the same way as tax, over a certain number of shifts I start to earn £20-30 for a morning locum (18 patients, 2 home visits, heap of paperwork, 4.5 hrs work and a tonne of responsibility). Yes it's an artificial calculation because I don't pay 40% on every penny I earn obviously but while I have other pressures on my time it really doesn't feel worth it to work more and more - definitely law of diminishing returns. (Calculation also includes childcare cost, petrol money).

As someone who used to earn over £50k but now earns less than half that I can confirm this is utter nonsense.

For most thresholds it is a tapering effect. It isn't that you have less money earning £51k than you do earning £49.9k, you just lose a large percentage of the extra.

However, there are small anomalies eg when they remove taxation on savings for most people in April. Standard rate tax payers will be able to receive the first £1000 of savings interest tax free, whereas higher rate tax payers will only get the first £500 of interest tax free. If you have a lot of savings and are only just a higher rate tax payer, you will have less income overall than if you earn a tiny bit below the higher rate tax threshold so have the higher allowance of a standard rate tax.

However, this may be relatively easy to get round – I’ve seen some ideas on Moneysavingexpert for those affected.

I get what you're saying OP. It's not too different from the benefit trap at the other end, whereby someone coming off benefits into work can find themselves worse off as a result of the extras they now have to pay out for (e.g. commuting), even if their earned income is higher than that which they had on benefits.

However, the difference is that for those on £50,000 that's pretty much double the national average and so a lot better off that most (75% of the country earn less than £35,000), so sympathy is always going to be limited. Furthermore, for those who make the transition into the higher rate tax bracket, there is usually the potential to go on to earn even more (in a way that does not exist for your average NMW job when people get off benefits). In that way, the short-term 'hardship' caused by loss of CB is negligible when you consider the longer-term potential advantages.

The higher rate tax band is a bit of an illusion. Yes you pay 40% tax, but very little NI (2%) on that section of your income. So about 42%. Lower incomes pay 20% tax plus 12% NI. So 32%. So your tax rate only goes up by about 10%. The threshold for NI is different than for tax, I know but the above figure do approximately apply.

I work 40+ hours a week in quite a stressful job full of deadlines in a very uncertain industry and guess what for.....£18k......my partner also has a very stressful job doing on average 35 hours a week, I say on average because a lot of the time he has to travel the country.....and guess what for £22k......

we own (mortgaged) our house we don't rent, we don't get a single penny in tax credits, the only thing we are entitled to is child benefit....which yes, even at £20 a week is a massive help. I am currently 28 weeks pregnant and when I go on maternity leave I will only be picking up SMP...around £134 a week.

I would much rather be in your position and not be worrying how I am going to be able to afford to buy shopping for the next 9 months, then how I am going to be able to live after paying for childcare when I come back to work!

as for your comment, "People who earn just over 50k are generally the work horses in skilled jobs that ecomony needs to grow. Given that such people will be saddled with high student loans in the future, what will senior teachers, doctors gain from all their hard work?"......I am the lowest paid in my office as I am not long out of uni, yet I seem to be doing the most work with very little benefit, all the running around included. and yes I do have a student loan to pay also, it may not be much at the minute per month, but it still has to be paid. I also have an hours commute to work.

spend a day in a low earners shoes then say that again......

If you're earning £50k or more your hourly rate (and I appreciate this isn't how salaries are really calculated) will be at least £25. Even if you lose half that you're still earning considerably more than a minimum wage earner.

My next job move should bring me to over £50k - and it will be a noticeable difference (I'm on just under 40k at the moment - but in my field the best way to get increases is to move jobs). Bring it on tbh.

I have some sympathy. If you earn around the threshold and are not likely to increase your salary much more in future years, I can see why you might, for example, decide to cut your hours in favour of a better work/life balance instead of going for the extra salary.

On balance, however, I think most people are noticeably better off when they enter and climb the hr tax bracket.

In London 50k does not mean that you have a nice home and a good life. It means that you are scraping by day by day. I work part time and earn more than 50k and I worry about money alot.

If £50k is scraping by day to day in London, how do they people on £20/30/40k manage? £50k is still above average in London.

As other posters have noted, £50k is a better place than £17k. Fact.

Well. That depends on a lot of variables. I'd rather have a household income of 17k than 50k, yes. Notwithstanding that as I have kids I'd get topped up, but I'm not one who thinks getting a lot of tax credits is the life of Riley. Always better not to need them if poss.

But, personally I earn similar ballpark to 17k for part time work now. If I go full out, I might hope to earn 50k in a decade or so, working more than twice as many hours as I do now. But I don't want that, and don't need to do it. So for me, 17k is a considerably better place than 50k. Fact. Part of this is due to having a partner who also earns, but again we'd choose the 17k part time option for him over 50k flat out. Which is what it would be for us. And we're very lucky to have the option to reduce outgoings to allow us to work less and spend more time doing childcare, and not everyone can do this, and not everyone who can do it wants to. But I don't think it does any good to pretend that there aren't lots of people who would much prefer 17k to 50k, given the right incentives. And for some people, those incentives do exist.

Also, with that said, presenting it as a choice between 50k and 17k isn't really an accurate one either. For a lot of people, they'll be in the same position as eg the GP upthread. They're just going to cut down their hours a bit. So it'll be a choice between 50k and 44k or whatever.

Also people need to remember that they are only eligible for CB and CTC while they have dependent children. Once this is no longer the case they will be loads better off than those on lower wages. Considering the current pension ages this is an advantage not to be sneered at...

In London 50k does not mean that you have a nice home and a good life. It means that you are scraping by day by day. I work part time and earn more than 50k and I worry about money alot.

This for me sums up what is wrong with our nation's capital. It is bonkers that an income that is so far above the reality for the vast majority of people (only about 10% of the country pay higher rate tax) means that in London you are still worrying about money.

Um, it's not compulsory to earn more than £50k. Lots of people manage just fine on considerably less than that like me. It's not even like all the 'good' jobs (which to me means interesting and fulfilling more than just well paid) automatically pay that much. There are plenty of interesting, worthwhile, challenging, responsible jobs that pay less than £50k.

So

barbara people do manage well enough, I think the point is that it's hard to save up for a deposit to buy your own home in that case. It can be done but if half your income goes on rent then it's not easily done.

It does depend on where you rent of course. Our current rent is nearly £2000 a month. Luckily DP was contracting for a while earning lots so he managed to save up a decent deposit.

Isn't the real problem here the jump in tax bands? Forgive me, my knowledge of the fine detail is ropey, but essentially you jump straight from 20% to 40% at just over 40k. That's a huge jump - and is potentially a huge disincentive for someone to, say, increase their hours so that they earn 45k rather than 35k. Equally, imagine you're a SAHM with a modest amount of income from a property you let out. You go back to work and your tax free allowance is already taken, so your marginal tax rate from that work is significantly higher - and potentially means that you are working for nothing/very little by the time you've paid for childcare and transport (both of which are post tax expenses). Obviously there's the argument that this sort of person isn't the neediest in society (they have that income, plus an OH who presumably earns enough to support them etc etc). BUT and it's a big but - there is a cost to society if some groups are disincentivised to work (and particularly if, as is the case for a number of SAHMs that I know, they are highly educated and skilled).

A experienced senior teacher or a hospital doctor with 3 children would be better taking a job outside London. The London weighting is swallowed up by high tax, student loan repayments and possible loss of child benefit.

Dh has turned down a 55k job in London to take a more local job earning well under 50k. We keep our child benefit, dh will have less costs of getting to work and less stress. He is a computer programmer so it doesn't affect Londoners wherever he does his work. However it made me wonder about lots of highly skilled people Londoners do need.

*I'd much rather earn £50k + without CB than £17k with CB

For larger families, eg 4 or more DCs, when you include tax credits and housing benefit, the difference in actual income between those two salaries is a lot smaller than you'd think*
Can anyone be arsed to run this calculation? It would be interesting to see. I don't know anything about the benefit system so no idea what there is in terms of tax credits etc.

Assume both the earners pay 5% into a pension and have 3 kids.

I'm still very bitter about losing child benefit, not because oh woe us we earn over 50k but because two people earning the same combined amount (or more) would take in more after tax and still keep child benefit.

It's not such a big amount after tax and even though I can't say we struggle we are far from well off. We don't live in London and yet the average property price is 12.7 times the average salary here.

London is a different issue. There is a reason why wages are higher there. It's because the cost of living is much higher.

If you want to compare things you need to compare earning more than £50k and less than £50k whilst living at the same place.

Fwiw, when Dh went over the threshold for the 40% tax, there was clearly a band where you ended up earnig less after tax than if you were just below the threshold. The compay worked it and never proposed wages in that band.

Also, correct me if I'm wrong but I'm pretty sure that you loose CB if you earn over £50k and receive CB. Unless both partners earn over £50k, one of the partner should still be able to receive it.

Dh has turned down a 55k job in London to take a more local job earning well under 50k
As would I. I will probably hit £50k in the next five years. I live in the NW. London weighting in my career would no way cover the gap of the cost of living.

For reference, my 3 bed detached/two baths/wraparound garden/1 hour commute costs 4x my salary.

It isn't a simple balance, we had more money when dh moved to a lower paid job that had lower commuting costs and time. This is because of the tax and NI he had to pay on the earnings that paid his commute and because it reduced the time we had to pay for in childcare. Neither job earned over £50k it was the extra stuff related to taking the further away job.

London's a separate issue up to a point. Obviously you can't do a direct comparison between people living in completely different areas. That's unfair. However, some 50k plus earners in London would have the option of leaving the capital, particularly those on national fixed payscales, reducing their cost of living significantly, and working less because of this. And that's relevant to this discussion.

If dh had taken the further away job he round have got an additional 9k. Yet he thinks that we are finanically better off with the lower paid local job. He could have worked from home some of the week, but he thinks the hassle does not justify the extra money.