To be shocked at the difference in take-home pay between £30k and £90k

[PAYE]

So many times on MN, we hear people telling high earners to stop complaining. It appears that people think that someone on 90k has three times as much money as someone on £30k. However, progressive taxation and the benefits system means that there is surprisingly little difference in take-home pay between 'low' and 'high' salaries.

I used the Listentotaxman and EntitledTo websites to look at the difference in net pay and benefits at every salary level from £25k to £130k. I assumed a single earner with two kids, £1.5k in rent and £1.5k in childcare costs, a student loan and 5% autoenrollment pension contributions.

The light blue bars are for monthly post-tax income from Listentotaxman.com. This assumes no benefits and shows take-home pay rising with income.

The dark blue show post-tax income after benefits. The benefits are taken from Entitledto and added to the post-tax income.

This shows that

1. If you have kids and pay rent, there is little difference in take-home pay regardless of the actual salary
2. The net monthly income for someone on £25k in London with 2 kids, is the same as for a £90k salary without benefits.
3. For the person in my assumption, their post-tax and benefit income would be just 15% higher at £90k than at £30k
4. Monthly income is very flat at all income levels, however, someone earning £30k on universal credit is allowed to complain, but someone on £80k is told to shut up, even if their take-home pay is lower.

The reason take-home pay is so flat is due to:

1. tax-credits/universal credit topping up salaries
2. Housing allowance paid to private landlords
3. child benefit being removed at £60-80k
4. Childcare support removed at £100k
5. Removal of personal allowance from £100-120k.

While no one wants children in poverty, what is the incentive to work harder if take-home pay is the same? Why increase working hours, go for that promotion or take that extra qualification?

AIBU to be shocked at the difference?

At a cursory glance, I'm not surprised at all by the graphs. I'm also very happy as a single, childfree person earning over £100k to help, via taxation, to support lower earning families. In my view, this is part of being a good citizen and helps build a stable and safe society.

My salary does allow me a nice lifestyle and the ability to save heavily into my pension, so I have nothing to complain about. The marginal tax rate from £100k-£120k is hefty but when my employer awarded a 4% pay increase across the board last year, more extra £s went into my bank account each month, as a result of this rise, than for most of my colleagues.

I do think there is a case for much more heavily subsidised child care for all income groups- the double whammy of housing and child care costs in London is punititive for even very high earners.

Boo fecking hoo!!!

I have earned £30k, and I have earned £90k and upwards of that. And I can tell you now that I am FAR FAR better off as a higher earner than I ever was a a low earner when I got to keep more of my salary.
I wouldn’t weep too much for us higher earners - there are some legal ways to keep more money, pension relief etc.

and no, we don’t why things like child benefit, but I don’t NEED child benefit.

That can only happen with removing the discount. Currently with the high discount, building new social housing is like a leaky bucket. As fast as the houses are built, they are bought by the tenants at a huge discount to be rented back to the council at a premium.

It is true that the claimants don’t get the benefit, but the young families paying rent don’t get the benefit of their high salary either as it goes to landlords. This is why their complaints are justified.

Yeah, they do. And then need to take a good hard look at themselves. IMHO.

Not really. It is mostly expressed in paying for housing and not the amount.

Sssh don’t say that- the story is the poor £90,000er gets nothing and holds up everyone else.

They had to walk to school up hill both ways with bottle caps in their shoes too.

and the only benefit I'm entitled to is child benefit.

Not only. Also you can get 20 percent discount for childcare if your kids are below 12 via Gov Childcare Gateway. It replaces Child tax vouchers

The fundamental problem with the tax and benefits system is that it creates far too many situations where additional work is not worth doing. That runs right through from people on 16 hour minimum wage contracts either up to those on 100k+.

A sensible system would remove all cliff edges and have far more gradual progressive tax rates. That way nobody would ever feel they have reached a natural stopping point where career progression was economically unviable.

If you designed a tax system from scratch it would look nothing like what we currently have in place. It’s the result of a multitude of unrelated policies being bolted together and creating significant unintended consequences.

😂 I just find it wild that so many people don't seem to realise that UC isn't just for very low earners. There's so many incorrect, and common, assumptions. Many people would find that they would in fact be entitled to a payment if they did the calculation (properly) and actually applied.

This is a really important point, people are only getting this inflated benefit incomes because of high costs of living. People on fairly high wages (isn't it up to £50k) can claim support for childcare costs etc too.

I've just done my own calculation in this style for my household where I am the sole earner and we have 3 DC and rent to pay. My "salary" based on my combined earnings and UC income would put me at £49k. But, that is for one household with 2 adults so is the same as a couple working a bit more than full time minimum wage, it's not huge, it's not like earning £90k at all. Granted we don't have any childcare costs obviously.

It is true that the claimants don’t get the benefit, but the young families paying rent don’t get the benefit of their high salary either as it goes to landlords. This is why their complaints are justified.

Except those young families can potentially move, have ultimately better savings potential once childcare years are over and can save for a deposit without their income being affected, they can add to their pensions and reduce their tax burden. Their complaints are only justified if you look at the bottom line for 2/3 years. In every other way they are better off than someone earning £30k relying on benefits.

They're not, though. So I don't get that.

The majority of these posters know full well they can claim UC.

Most of them will be claiming every penny they can.

They are posting misinformation on purpose because we have an election coming and they are worried they might loose some of their privilege.

"its 55,500 people"

So 0.16% of the working population?

A tiny amount, for a short time, as stated.

I've done it and I was out of the bracket at £45K. I'd consider anyone earning less than what's claimed to be the average UK wage (£35K - I don't think it's anywhere near that in reality though) to be a low earner. So they absolutely should be entitled to top-ups, £30K isn't enough to live on anywhere near comfortably these days.

Everyone gives the examples of Doctors, but they have been leaving in droves for years.

Most people are not as geographically mobile for work as Doctors, nowhere near as such. Even people with passports that are not UK, there are other factors which keep them here.

The " I'll take my ball and go home" threat is very rarely followed up on.

I'm also very happy as a single, childfree person earning over £100k to help, via taxation, to support lower earning families. In my view, this is part of being a good citizen and helps build a stable and safe society.

I agree with supporting lower income families. I don’t think taxation should be used to line the pockets of private landlords, though - housing really needs to be sorted out,

It does all depend on individual circumstances. You'll find that it's childcare and rent that make the biggest difference. If a high earner (like the 90k perspn in this scenario) had a mortgage and no childcare costs then they most likely wouldn't be entitled. Having other things like disability element for children and the claimant themselves makes a substantial difference to the amounts too.

Pensioners still get housing benefit though, if they're renting. The current benefits system is a trap - there's no incentive to get out of it unless you can get up the career ladder to a high salary. It encourages people to live hand to mouth each month, spend it before they penalise you for saving (capital limits) and never own their own home. Not that it's possible because, again, capital limits prevent people from ever saving enough to get a deposit together. So their rent gets subsidised with public money for life.

Even Bojo was trying to bring in a capital exemption for saving towards home purchase deposit, but that got canned when he went.

YANBU - this is the Tories dismantling of the tax credits system. Worked so well under Labour at supporting middle earner families especially those in the south east who needed it to support high costs. 14 years ago the point you wouldn’t get any support was £50k so approx £80k in today’s money. It was really good at ensuring families were supported and wasn’t part of the benefits system. The Tories cut the tapor and then axed them entirely in favour of UC under benefits system which work for precious few and certainly don’t support middle income families.

That's not how the opening post is worded at all though, it reads like they're trying to make out all people on £90K plus earn the same in reality as someone on £30K - which is the biggest load of bollocks I've ever read.

I know. Because they've made some pretty incorrect assumptions and it seems not even bothered to check the entitlement to UC for the person on 90k

I don't think it's even the plutocrats. We feel poor because we have killed off economic growth in this country. A huge proportion of the UK's rising wealth was actually rising property prices, caused by undersupply of one of the main inputs to growth. It's made the people who vote feel the country is doing well when actually it's a symptom of malaise.

In my defence of plutocrats: take the political bogeyman of the non-doms.

The average resident non-dom pays £120,000 in personal taxes, or about fourteen times the average UK adult. 93% of them are foreign-born and legitimately globally mobile. Their non-dom status means they don't pay tax on foreign income or gains, which seems fair to me. For every non-dom we lose, we must double the tax rate on fourteen remaining adults.

I don't mind paying high taxes, but I despair that our economic debate seems to be so focused on who gets to carry the burden, instead of how we reignite the engines of growth. The Tories have been awful. Jury is still out on Labour. They talk about growth, which is good, but there are still too many labour MPs who talk as if only 'the rich' would pay a bit more, all would be solved. It's just the wrong way to think about how to create prosperity for all.

I will try to explain what the OPs means:

I earn 70k and live in Central London (can’t move because of my job). Single parent with rent of £1900 per month (mortgage will be at least £2400).Thank God I have free hours and this reduces my childcare bill, but after paying all bills I am left with barely something.

My neighbour is a single mum to 8 years old. Similar rent and earning £27k per year. She gets UC on top of her salary. She has more disposable income than me.