There’s NO point earning over £50k?!

[ThisReallyDoesntAddUp]

Because of the £50k child benefit limit and 40% tax rate!

So I earn £78,000 pro rata overall now with my job following a mid year pay rise. This includes bonus and car allowance. I work 4 days a week (80% equivalent) which brings the overall pay this year down to just shy of £50k with a £9.6k bonus.

Out of the £9.6K bonus due in March, I’ve worked out 40% will go to the taxman, over £2K will need paying back for child benefit as I’m now over the £50k threshold, and a further £800ish will go towards my student loan. Deductions of just under £6k!!! This means I’ll only take home 30% of my bonus?!

I’m now on mat leave for baby number 3. AIBU to make sure when I go back I remain under the £50k mark by reducing hours even further?! I’d then have less to pay in childcare mitigating the difference in the pay I’d receive working an extra day each week.

Its an absolute joke, I was hoping to go back to work after my last baby and push on hard with my career but what is the actual point!! I may as well work less hours, keep the child benefit and pay less in childcare!

Get you completely and I completely agree.

If I was to imagine my perfect society, everyone would live in a reasonably minimum level of comfort. We would have strong communities and would feel proud and appreciated for our roles within them. Pride and a sense of community would motivate people to work, not poverty. People choosing to undertake a higher amount of work (which includes the time spent on gaining skills / experience), or more unpleasant, dangerous, risky or responsible work would earn more to compensate them. As much unpleasant work would be automated as possible, and the profits resulting from automation would be a public asset. Individual asset based wealth would diminish instead of accumulate over time. We wouldn't need giant assets many multiples of our annual income merely to live in comfort and security (housing crisis). All children raised in my perfect society would be cherished and encouraged to thrive.

I haven't quite worked out the fine detail of how to make my vision happen yet 😅but I can dream right?

You're right. That £15.90 a week is more than enough to cover all costs for another child. I'm sure there will be a stampede.

The high cost of living combined with the freezing of tax thresholds is becoming a disincentive IMO.

The combination of higher rate tax + student loan has meant many ‘higher earners’ have been stung with a 50%+ tax rate on earnings of £50k for years now. Plus the loss of child benefit and basic pension contributions… and you can be a couple of hundred quid better off a month for a £10k salary increase.

I agree, what’s the point and why isn’t the government addressing something so clearly punitive / a disincentive to work.

YANBU, scroll down and look at this chart. The system is so broken 🫠https://www.contractorcalculator.co.uk/marginal_tax_rates_explained.aspx

Enjoy more time with them now, it sounds like you've thought about this really sensibly, it's not you, it's the system!

You can. I share it!

I'll vote for you... @KidsDr for PM 😉

You are not wrong OP. Taxation is why productivity is low as people are loathed to put too much effort in for so little return.

But the less you earn, the less tax you pay. Unfortunately proponents go high tax would rather stay poor as long as everyone else is too. Crabs in a bucket.

You probably already do. Vote for people who put soundbites like these.

The bit missing is how to achieve this utopia.

I haven't heard any politician speak in these terms. Rutger Bregman is pretty good at challenging them. He has some interesting ideas.

We've already said we need an overhaul of the tax system.

Highly recommend this article by tax expert Dan Neidle too.

https://taxpolicy.org.uk/2023/09/24/70percent/

"If I was a Tory Chancellor, I wouldn’t abolish inheritance tax. I’d fix the ridiculous marginal rates that mean there are hundreds of thousands of 30-somethings paying more than 70% tax on every additional £ they earn.

"This is complicated, unfair and a disincentive to work; it could also plausibly be holding back growth. Any government serious about fixing the tax system should start here..."

"And if your reaction to this is “I don’t care about people earning £50k or £100k a year”, then you should.

"It’s more people than you’d think. After the recent surge of inflation, something like 23% of taxpayers earn £50,000 and 6% earn £100,000.

"But that’s a snapshot, and also not quite the right measure. A better question is: what proportion of households will at some point have someone in a position to accept a promotion, or work more hours, and break the £50k or £100k barrier? I’m not aware of any figures on this, but I expect the answer is a large percentage, perhaps even a majority.

"There’s an obvious impact on all of us if plumbers, doctors, IT contractors etc are turning away work/hours to avoid hitting £50k/£100k."

@whistleblower99 - hmmm? So you're not commenting on this thread whilst sitting on your arse?

Get out in the world and be more productive - leading by example is always best.

That’s not always the case. At the 100k level you can have an increase in pay and yet end up with less money if you have nursery age children. It happened to me. I got awarded a 20k bonus and ended up actually losing around 21k as a result.

If you have nursery age children you end up with more money if you earn 99.9k than if you earn 120k.

@KidsDr 's Utopian vision sounds like Communism to me. I'm not sure what happens to innovation, entrepreneurship and productivity in a society like this. And if you tell me my individual assets are going to dwindle over time, then I will be emigrating, along with many others who will no longer be paying UK taxes.

And for those bashing asset owners, don't forget that includes anyone who builds up a pension pot and investments over their working lifetime. My assets were hard-earned, and mostly built from money that has already been taxed as income, and they now provide financial security so that I don't need to rely on the state to support me.

As others have said, there are problems with the tax system, but the most significant is the freezing of thresholds at a time of rampant inflation and stagnating wages. We need to be encouraging people to earn more, not the reverse.

The point whizzing over your head there...

A single parent on £60K loses all of their child benefit because they are supposedly too rich to need it, plus pays higher rate tax. However, if they want to buy a house and are offered a mortgage three times their salary, they can buy a house for £180K, maybe a little more if they’ve managed to save some deposit. What sort of house can that “rich” person buy in the south east, where they need to live to earn their £60K salary?

I do. Paying six figures in tax. Probably a lot more than you.

@nightmareXmas Without wanting to put words into their mouth I don't think @KidsDr was really talking about people who work for their money and have a pension. An asset-led lifestyle is one in which income earned through labour ie working is irrelevant compared to income earned by assets. In other words people who don't need a job. Ever.

Agree stick it in your pension

You're right, I guess what I mean to say is, obscene assets such as are owned by some individuals currently (eg the kind of money that one person can't meaningfully spend and that leads to a gross imbalance of power), should diminish over time. I was not thinking of ordinary savings worked hard for and to be spent within a person's lifetime*

*(although maybe I did - these assets will diminish over time, but not by being stolen but by being spent!)

Agree re thresholds.

Yeah, I work my absolute arse off for just over minimum wage, and no, it’s not a job that just anyone could do. I certainly don’t feel rewarded by it when I’m struggling at the end of the month.

Exactly OP. Happened to me as I have 3 dcs. Ended up with an effective tax rate of 69% over 50k for several years.

*(although maybe I did - these assets will diminish over time, but not by being stolen but by being spent!)

That's true @KidsDr , between inflation and taxes, my assets are dwindling a lot faster than I had envisaged! Ironically I may well end up a higher rate tax payer for the first time in my life if the thresholds stay frozen 😕!

I earn similar to you and disagree

Yes I’m taxed more than if I earned £50k but my take home pay each month is still about £1k higher than if I earned £50k… so I’d say that it’s worth it.

Huh? What’s untrue about it? They do pay way more tax. The top 1% pay nearly a third of all tax.

Sometimes.

https://www.lse.ac.uk/research/research-for-the-world/economics/how-much-tax-do-the-rich-really-pay

Regressive taxes like VAT and council tax take a disproportionate amount of lower paid workers’ income and fall hardest on them.

@WingsofRain genuinely intrigued as to what you do/how long you have been doing it? To have worked hard all your life for £12k per annum?