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!

As a proportion of their income high earners pay much less tax, the Prime Minister is a good example of that.

Dan Niedle is on the money. Both main parties are too scared to face a problem they have created. The higher earner now has pinch points that discentivises work.

It particularly affects families, and ones that could have been expected to vote Conservative given their incomes. But instead they are not going to and they are choosing to work less.

This would matter less if other tax sources had held up in the last decade, allowances hadn't been frozen and wages hadn't stagnated and inflation hadn't been so bad over the last two years.

The Tories are supposed to be high aspiration, low tax party. I've been paying higher rate tax for twenty years and it is the worst it has ever been financially and public services are on their sense. Slow clap for them.

Used to pay similar rates under Labour, I received decent public services. Now I have private schooling and private healthcare. I don't expect anyone to be sad for me but honestly I preferred Labour because I did better financially and the country did not look like a dump.

So not untrue then.

I earn in same ballpark as OP and to be honest, while I see the "problem" I don't get some of the complaint except for I want more free money and not pay back!

When you earn £78k, child benefit is peanuts.

You took out a student loan which gave you the opportunity to earn this higher salary at a relatively young age (i assume you are <40). You knew the terms, be thankful you had the opportunity, have benefitted from it, time to pay it back as you agreed to.

I have zero sympathy for these complaints.

The higher tax band is a separate issue, I have no issue with higher tax bands, those who earn higher salaries should pay back more. imo the threshold should be a bit higher as it hasn't kept in line with inflation. But it is what it is, and you cut your cloth, or make your career decisions and plan significant family decisions around it. 🤷🏻‍♀️

In absolute terms not untrue, clearly someone who earns more pays more £ in tax than someone who earns less.

But utterly irrelevant and misleading.

Someone like the Prime Minister who earns more pays a smaller proportion of income in tax than teachers and nurses.

Of course what high earners never acknowledge is that they only pay 2% NI on earnings over £50k. That’s a very big discount.

It really, really isn't.

NI as a whole needs binning, and incorporating into mainstream income tax. It doesn't do what it was initially designed to do, and functions instead as a tax that only applies to certain age groups and income types. It's disgusting.

The problem is this would only work if all jobs actually contribute something to society that you should be proud of. But so many jobs do not provide value to society and only exist to make rich men people richer, so the only incentive to do them is if they are paid better than the jobs that provide value to society...

Exactly this, thousands of people handed homes, free prescriptions, money paid into their accounts each week for decades at a time 😞 I know, as some of these people are my friend's. They all have more spare money than those of our friendship group who work full time, pay for their taxes, homes, pensions etc. It's not exactly the hard workers causing the problems here.

They are in for a shock if they haven't moved to UC.

@Charlie2121

I had quite an eye opening conversation with some friends yesterday in London, where basically none can see how they can sensibly afford two - and these are people with very high incomes.

Two sets of full time nursery fees at £2-2.3k a month is most of a £100k salary. Increasing interest rates mean that £2.5k mortgage might be more like £4k when they remortgage.

They are all incredibly bitter about not being eligible for tax free childcare and free hours, IMO it’s a disaster for the Tories with higher earning young people / families.

YANBU. Our tax system needs to be reformed - it is an absolute shit show.
NI really needs to go.

OP, it is worth it. These cliff edge financial changes at 50k amd 100k can actually hit in a way that does knock the household finances. Obviously it's a much better problem to have than being on a lower wage, but it does hit. I would recommend ploughing the money into your pension. This may leave you in the position where you can reduce or stop payments if you are getting close to whatever threshold exists then. At this point you will probably need money for university so you will be glad you made provision in earlier years!!
In the meantime, there are obviously other questions relating to your quality of life and whether you want more time with your children. Only you know what these answers are and if you have the kind of job you can pull back from either permanently or temporarily. Whatever choice you make here it's important to remember that saying yes to one option means saying no to other things. There aren't necessarily right or wrong answers but think through if your choices reflect the desires and values you have for now and the future. Good luck!

If people earning over £50k paid 12% NI, is 40% tax, they’d be paying a 52% tax rate.

With a student loan, it would be 61%.

That would be an incredibly high rate of tax.

A single person on £50k can’t afford to live alone in their parts of the U.K. now.

This is it exactly. The costs of being a high earner seem not to pay off. I had a colleague who at a decade younger than me explained his finances and how he couldn't cope because his wife was pregnant and childcare costs plus a mortgage in London was extortionate. It has got a lot worse since I had the same issue a decade ago.

Why don't you stop the child benefit?

You only pay back if you received it and don't need it, which clearly clearly is your case on that salary!

Child benefit is the for those families that need the financial help. Not for high earners who feel entitled bc they had kids and then complain about paying back what they didn't need in first place.

Demonstrably it isn't, since there's no specific needs test that you have to meet in order to get CB and plenty of households with more money than OPs get it. I should know, mine is one of them. If you're going to moralise like that, you need to get your facts right.

If the tax system pushes people into certain behaviours then it's either deliberate or the government needs to change it. It's completely rational to try and minimise your tax, particularly when you're in the earning brackets that are particularly high. There needs to be a graph that combines income tax and NI though because NI goes down from 12% to 2% once you are a higher rate tax payer.

When our DC were small DH and I both worked PT to stay below the higher tax rate, now we both work FT and pour money into our pensions to stay below the child benefit limit. Putting lots into our pensions means we won't be dependent on benefits when we retire which is why out tax system is set up to encourage pension savings as much as possible.

People are starving and struggling here and all over the world. Get some perspective.

People not working more when it isn't worth their while is going to alleviate starvation, then?

I actually don't agree. I am a SAHM so we're a one income family. We really used our child benefits, it helped us a lot. Then my husband's salary went over 50k and we pay back majority of it. (If he gets a bonus we have nothing)
Yet some family ears 20-30k less. Say they are on 30k each for the husband and wife. They're better off as us? So I don't think you can say some people are hanging on to benefits when they earn 50-60k. Yet most people wouldn't say it to someone earning 20-30k, knowing the husband or wife also works.

Exactly, people always go off on people with high salaries that they should stop the benefits, yet it could be single I come for example. No one says that to someone who complains that earns a teacher salary and her husband works as an NHS physio. When a lot of the times they're financially better off!

Child benefit is the for those families that need the financial help. Not for high earners who feel entitled bc they had kids and then complain about paying back what they didn't need in first place.

Why shouldn't a "higher" earner get child benefit?

50k is not a high earner today, not with house prices vs income disparity & wage stagnation.

28k in 2000 is 50k today

I agree, it's causing people, mostly working people who contribute, to have less children or no children at all. (Which is a problem for our aging economy). It doesn't disincentivise people on the dole though . They continue to have kids. And secondly is causes high earners who pay high taxes and are thus necessary for our economy to work less hours. You're basically disincentivising working