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?

I live in East London and childcare here is slightly cheaper than other areas of London and we pay £1.7k a month for a full time place, so yes, it’s easily possible to spend £25k a year on childcare in London.

Isn't it funny how all the 100k a year earners are single mothers ?

Why isn't there a 2nd income considered?

Mental gymnastics again.

I'm sorry but this is just ridiculous.

Earning £100k you're going to be taking home £5,700 per month before any pension or student loan payments.

75% of that is £4,275 per month. Are you really claiming that a typical nursery place in London is over £2k per month?

I didn’t say anything about single mothers?

I merely gave the costs of childcare, to demonstrate why being excluded from the schemes is so frustrating - it’s still ruinously expensive.

Repeating ‘mental gymnastics’ over and over isn’t the debate-crushing argument you think it is.

Because you are basing your calculation on one income.

Everyone here does, apparently, it's so convenient to have 2 kids and only one income for the calculation.

Then you can add ALL of the childcare cost to one rather than divide it across two.

Yes around £2,000 a month per child is pretty normal.

Of those local to me, the cheapest is now £1,900 and then they’re all over £2,000 - up to about £2,300 I think for the most expensive.

So - you can see why not having access to tax-free childcare and the additional hours is frustrating.

Why not? someone who spent year in education, most likely paying off student loan, possibly having responsibility over human life (doctors) or livelihoods (employing business people), why shouldn't they get more than someone with no education, much skills or responsibilities?

Appreciate that depends on area you live in 100k might sound astronomically huge for you, but in SE it's not a lot and we have over 500,000 people in the UK over £125k right now. This is out of about 33m of economically active

not OP but yes, some places are £2.4k a month.

Our borough is cheaper and we’re paying £1.7k a month but Google a few places and you’ll see how insane some of the costs are.

No it hasn’t. It’s at a new high. It’s now over 50%. The ONS is your friend. Or maybe not if facts aren’t your thing.

Yes a very specific set of circumstances but thanks to MN I've learnt a lot about UC and I'm amazed at the amount of free money dished out, especially people getting rent paid. Wtf.

It's all due to Gordon Brown trying to buy votes with benefits and now it's out of control.

Taxing married couples individually makes it worse as 2x30k takes home a lot more than 1x60k. And losing your allowance totally at 100k is criminal. And thank fuck I don't live in scotland

Its a shame that the OP chose to make sweeping generalisations rather than pointing out that those figures only applied in a very specific combination of circumstances. But why let that get in the way of a good class war fight.

The government remove the benefit at £100k, which is why I use that figure to show how massive the childcare cost is vs the point of income at which it is removed.

But for your benefit, let’s say one earns £100k and one earns £35k. No childcare support. Your childcare would be exactly 50% of your take home pay.

But you can't just decide not to pay your student loan if you have one.

Wasting your time. Same posters every time with a name change who don’t understand marginal taxes. Will literally argue that over 100% taxes are not a thing and marginal tax rates aren’t a thing. Oh and they don’t harm productivity. Its word for word the same every time.

Your calculations only apply to single parents.
Many commenters are missing this fact.

It's over 50% because we have an ageing population.

Facts, and analysing statistics are really not your thing.

Keep trying.

Not everyone has children.
Those who do have children do not have £1500 childcare costs for very long or do not pay for childcare at all. We never did. Therefore we never claimed for childcare and just had one wage and a SAHP. Meaning our take home was nothing like that of someone on a much higher wage.

I didn't.

Clearly it's part of the mental gymnastics that the posters want to do to get to their "poor me" conclusions.

This is fake news! I earn 50k pa with full time nursery fees and received nothing except child benefit (not complaining) and a minimal contribution towards nursery fees (corrected)
My nursery fees mostly came from my savings. On the whole private nurseries still charge a lot on top of free hours
I have no idea where the boost cited in the graph comes from.
i would receive some as things are
tbh I’m shocked at people on 90k complaining… and who also don’t seem intelligent enough to interrogate whether this graph is credible

The maths is simple. Take home approx £5k a month. Nursery bill is £1750 per child. 2x£1750 = £3500. £3500 is 70% of £5000.

Exactly and some one needs to pay for that. Good to see the same old misunderstandings under a different name!

This is not quite fair.

Yes, tax is redistributive. I'm a high earner and I'm okay with that because I'm a big fan of there being nurses, teachers, care workers, bus drivers, staff in my favourite cafe etc.

But also it is worth working hard! High earner ends up vastly better off, because:

1. high earner is quietly building up a bigger pension

2. high earner will suddenly be far better off when childcare costs fall - that money goes straight in their pocket, the benefit recipient does not get any extra.

3. high earner can often get a mortgage, not rent, which can actually be cheaper, not to mentioning resulting in a valuable asset and often being rent free in retirement.

4. benefit recipient is often at the mercy of private landlord on short tenancies, with housing benefit limited to the bottom third of rents meaning they are often in the poorest quality housing.

This chart is based only on people who qualify for benefits.

The universal credit takes into account savings whereas the tax credit system didn't.

Most people I know have more that £16k in savings and don't qualify. I would expect a many on higher wages to have savings of some sort over £16 and therefore not be receiving any top up.

But after tax 100k is 5650 PCM, so it isn't, your maths was wrong.

Pay into a pension on that and you are under the threshold and still get your benefits.

I don’t get the right combination of benefits (I only get PIP middle and enhanced rate, I don’t claim ESA so I can’t claim the severe disablement premium which would mean I could get the 30 hours).