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?

Yes own a second property (which people often think means you have plenty of money) but will cost more to sell it unfortunately. I checked the entitled to website and am not entitled to anything. We have nothing spare at the end of a month unfortunately

Some obvious name changers ITT. Particularly those who don’t understand marginal tax.

Yabu. As you yourself said its specific circumstances.

However there is a concern why shouldnt a single person earning 30k be able to live on that with 2 kids and just the CB.
Rather than needing childcare paid for and UC etc and housing benefits.

Childcare is very expensive concidering its for say 4 kids at once. I was already 33 in a good ok paying job yet child care was over 50% or my gross pay for the day. I would have taken home 3k in a year!

Otherwise you are saying it costs 54k a year to live on. (Post tax)

Which actually may not be too far off as we earn say 0.8x34k. And if we paid rent that would be say 24k. Plus CB. 2 dc under 11.

However if the problem os the low pay for lower skilled or certain work.
High costs of energy, transport and childcare and housing.
Then consider that the richer and higher earners generally make money out of their housing. And may have businesses which pay lower workers very little.

Can 2 people on min wage afford to live?
And some of high earners money is stuffed into their pensions where they claim 25% tax on up to say 30k.

If i earnt 60k
Put 32k into pension so saving /gaining 8k tax.

We paid like 700 /_mth to rent a 2 bed here 22 y ago. I think its more like 2k a month now. With our wage going up perhaps double.

Relatives on benefits from 20-42 are still on benefits with no property now no car etc.
We worked bought a house 2 cars. Will have very small pension though. But the biggest difference is the woman on benefits has been either single or on/off relationships and has constantly moved. So lots lost on furniture etc.

Having some sen like adhd and being disorganised perhaps poor on managing money.
Having recebtly been in a situation were person said they cant afford to pay for something so asking for help but then they mismanaged an even so wasted hundreds.

I would say pre covid and brexit the middle werent doing too badly. Now very squeezed. The huge rises in school transport etc.

Although i dont think its great for kids perhaps 9-5 school day would help.
As really we are all paying for some kids to do wraparound care...
Plus then our own kid tooo if needed.

Just quickly checking on those figures and assuming one child and paying at least £600 per month in childcare costs. Living in Walthamstow.

It seems that you would qualify for UC and get £173.70 per week. Once your child was in school then that would reduce to £26.58 per week.

My whole point is that it would not have to. The current system means that tax take is reduced as people reduce their hours due to the very high marginal tax/taper rates.

The mentality that 'lower earners shouldn't pay for rich people's children' is why we are in the ridiculous situation that the 'rich' have the same take home income as the 'poor'. And that makes us all poor.

Net contributors are now a minority. The majority now take more than they contribute. This is part of the reason. That’s a bloated state.

YANBU

However, the problem is that pay for many, many workers is far too low. Minimum full time salary should be at least 35k by now. The difference between high and low earners shouldn't be as large as it is.

100k difference between a bin man on 25k and and someone on 125k is ludicrous. Yes, somebody educated with more stress and responsibility should earn more - but not 100k more.

This isn't true - a family with two parents but a sole breadwinner isn't eligible for the childcare you've priced in (which is a huge amount of the total) unless that the non-working parent is disabled. And the calculations would be completely different if you're calculating on the same overall gross income but split between two people.

I was rather surprised to find a family member nets £32k in benefits. What on earth incentive is there for her to work? The ridiculous thing is that so many people are classed as “poor” and indeed believe themselves to be poor, when in fact they are better off than the schmuck next door traipsing off to work every day.

No one's marginal rate is 100% you are making massive leaps to get there.

Also, as we know the childcare years are short, and that career progression and other things also motivate people, you cannot say that a higher marginal rate of tax discourages higher earners

I get this if you rent, but as home owners and bearing in mind this was 10 years ago with an £800 mortgage. We have only ever had child benefit and never received any tax credits or been entitled to any other additional benefits. I was a SAHM so childcare didn't count (although you could say it counted in my lack of earnings).

So every pay increase my husband has seen has been a benefit to us and also when I went back to work. Low earnrs in London need topping up as they wouldn't be able to pay rent or childcare and it's annoyed me that the government has funded greedy landlords by this system.

High earns do have ways of getting round avoiding the £100,000 tax edge and child care by temporarily putting more money into pensions. This would only be for a few years until a child starts school. I do think child benefit should be universal as that comes with your NI contributions as it was always a way to make sure women got their full pension contributions.

Unless you completely exploit the tax relief system and bung £60k a year in your pension paying only 15% on the way out if you stay below £50k

Yes, only if you include children and pensioners.

It's always been that there are more net recipients than there are net contributors.

The state is hardly bloated after 14 years of austerity.

I get no support at all from the government to pay my childcare bill. It really annoys me to be honest

But why should a high earner get support? They can afford to pay their childcare bill.

A couple earning 99k is on the 97th centile of household income. So those who are earning 125k as a household income are in a tiny minority.

We are on a household income of 40k with both of us working, one child in nursery one in school, private rented house. We don't claim any top up benefits. We do benefit from tfc and 30 hours and child benefit. Those 3 things combined are worth less than 6k per year. So it's not nearly as lucrative as you're describing. Admittedly excluding student loan which I will probably never pay off now!

Not missing the point at all.

Very much enjoying your mental gymnastics though.

Obviously it's not "fair" that single parents get more money but nor do you want a situation where they can't afford to raise their child which then ends up in the workhouse.

Children don’t end up in the workhouse, what on earth are you talking about. Children don’t get removed from their parents because the parents can’t afford them.

I've got to say, I love these threads.

The state is both bloated and should fund the childcare of people earning in the top income deciles so they get to keep more of the money they earn, at the state's expense.

They should be praised for being net contributors ( having not been net contributors presumably for most of their lives).

The poor however are to be condemned for their bad choices and should get the bare minimum.

Seriously, get a grip.

Same reason they’re allowed to use the NHS.

Happy to pay high tax rates to fund quality services - but I’d also like to be able to use them.

2 nursery places in London is easily 75% of a £100k salary so it’s not exactly affordable.

Another thing I love is I can guarantee no one ever claimed that they were paid more or paying less tax cause they were getting 300 per month per child.

Over a year if you have 2 that works out at, 7,200. Bet no one was ever taking that off their marginal rate of tax.

Bet they don't take off the pension tax relief either, they'll calculate that differently.

See they only add the bits that are convenient, when it's convenient, hence the mental gymnastics.

No because we have benefits. In former times before benefits, children of single mothers did go to the workhouse. If you don't want a return to that then you have to accept that single parents get benefits to help them support their children.

It’s hard to argue that the state is not bloated - government spending stands at over 45% of gdp, virtually unchanged since “austerity” began in 2010.

So you're paying 25k each for 2 kids at Nursery?

Hahaha, whatever will you lot claim next?

You can easily spend £2k a month for a full time nursery place in London.

Inc the 15 free hours at age 3, if you have two kids you’re looking at £40-50k a year after tax.

Hence the objection to being excluded from childcare support schemes.

Completely easy to argue that its not bloated, public services are all underfunded.

Also your claim is incorrect:

https://www.statista.com/statistics/298478/public-sector-expenditure-as-share-of-gdp-united-kingdom-uk/

Government spending fell as a % of GDP in every year after 2010 only rising again in 2020.

The problem was that because the Tories choked off growth in 2010 with their massive spending cuts (whilst consumption and investment were low) and also went ahead with brexit. The UK had one of the slowest recoveries of any OECD country from the financial crisis.

:)