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 made a few suggestions earlier in the thread (yesterday at 14:42). I said:

"Try doing the same exercise with a single parent of school age children in say Lincoln or Gloucester or Hartlepool."

why should it be - as it has a negative affect on our economy to have a very low birth rate. By giving free childcare the economy grows much better. By charging for childcare at high prices it put people off having children or more children - bring in free childcare and it will increase the birthrate and that will benefit everyone in society

Exactly.

This got avoided, as have many other points and questions.

Take home pay on 90k is 64k. I really very much doubt the benefits would be that amount. This is seriously flawed this post. Load of rubbish.

The benefit system is partly to blame for our poor work ethic in England. Unpopular opinion I know.

We work longer hours than many of our European counterparts, retire later, get less holiday etc etc.

We don't have a poor work ethic.

Taking into account 6% pension contributions (which is what I pay), on 90k I'd take home £5097.70 a month.
On 25k I'd take home £1718.25 (after the same 6% pension contributions), and I would get £3312.19 in benefits giving a total of £5030.44.
Ok so I'd be £67 a month better off on 90k, but that's not a big difference and there might be other discounts or benefits I'd be able to get on UC that I wouldn't if I was earning 90k. Also, if I lived in a higher rent area (mine is quite expensive but much lower than London, for example) I'd get more than £3312.19 in benefits and would likely then actually be worse off on 90k than 25k

You are actually much better off because, your pension contribution is larger nominally.

Of course you are also forgetting to add the free childcare and discounts on to the 90k.

I do agree that childcare has to be free or reduced to a reasonable amount. The UK is the only country in Europe with such high childcare costs.

I 100% agree with what you’re saying but I equally would caution against going against the cash flow rich/ asset rich. As I said DP and I are either the richest or poorest depending how you look at it, and a lot of small business owners are probably in the same boat. We are probably richer from a flexibility point. We can borrow and pay back to ourselves with minimal interest which contributes to other business. Ie. We can fund our own renovation or kitchen etc.

We are trying to better ourselves and I do believe small business contributes huge amounts to economy. There are 5.6 million businesses in the U.K. ; 5.5 million of which are small businesses. And whilst large corporations are quite good at dodging tax, the small businesses do pay. Again they might have some flexibility about exactly when they are paying but ultimately you have to pay at some point. There’s no way around it unless you’re basing yourself/ your company in a tax haven.

The country needs a boost. We need more people to be cash flow rich not less. We need to stimulate growth again. Where people feel confident investing in the future; whether that’s on themselves, their businesses, or on their assets. Not a race to the bottom where everyone is living paycheck to paycheck.

It's not necessarily about hours worked though is it? It's about productivity and how motivated people are. Plenty of evidence that longer hours increases sick leave and reduces productivity.

Pension credit is already means-tested. So far as the state pension is concerned, I'm taking the view that I've already paid into it, so should get it when I hit 66 and a bit. I'll be paying tax on it (combined with my work pension).

It's about quality of work, not hours we put in.

Have you been to German supermarket? watch their cashiers at the till, how quick and efficient they are. Compare them with local - so slow, talkative, etc. Shelf stocker unable to show you where the product is. I don't think I've ever met skilled local builder/handyman, no matter how much I pay.
Same everywhere in lower /mid skilled jobs, our quality of execution is really poor in most areas. As a result we have multiple levels of supervisors, high costs etc and that famous productivity puzzle.

Talking nonsense so easily dismissed.

The productivity puzzle isn't so hard to solve btw, you've just actually got to know what you are talking about.

The fact that Brits work so many hours, have such a low level of unemployment, and have (usually) worse working conditions than their European counterparts indicates that they do have the work ethic though.

Productivity is another matter, but also because of the way it's measured the UK economy has a bit of an anomaly there.

This is brilliant- yes everyone in the UK is shit at their job compared to every other country. That’s why the UK has made no meaningful contribution to science, arts or business. Very sad but what can we do it must be genetic.

Exactly.

Hitchen's Razor applies here.

See it depends on the supermarket. Booths deliberately employ staff and encourage them to chat to customers. It's particularly of their business model!

So this isn't the example I'd use tbh!

Also i it might seem like the low earner is getting 5k a month but its only because their costs are high
Rent
Childcare
Children

That is not cash to spend, yes we are all funding it but the benefit goes to landlord and nurseries etc..

Ideally we would reach a high wage by 27 in time to have kids.
In fact it would make more sense to earn more young to fill pension have kids and buy property.

I think people don't realise the tax burden higher earners carry but also older people are stuck. They may be too old or too ill to work more and they certainly aren't going to get promoted so their income is more or less fixed.
When people say 'higher earners' most people think of the Sunaks and the Moggs who are rich beyond dreams and use every method possible to avoid tax. I've worked full time all my life and was on PAYE. No tax avoidance for the likes of me.

But isn't that the point of means testing? Those who are stuck with a limited income get the benefit (eg winter fuel allowance) those who have significant income from private pensions and investments don't. Seems fair.

My parents for example absolutely do not need the WFA. Nor do my aunt and uncle who claim it despite the fact they live in bloody Cyprus full time.

I have always heard that the cost of administering means testing would outweigh the savings, which is the main reason they don't do it.

Oh I see, I was talking about perceptions really.
I have a feeling back in the day the suggestion was it would cost more to means test WFA than it was worth. Also higher earners have paid in so possibly feel entitled to what was promised. Complicated. I remember an older media person saying they didn't need the money (WFA) but there was no mechanism to refuse it or donate it, unless you did it yourself.

I think the argument that pensioners need special consideration because they're on a fixed income is odd. It seriously overestimates the extent to which many people can just will their circumstances into changing and it seriously underestimates the very real advantages of having a guaranteed income.

As a 64 yr old childless widow (Aye, I know - violins!) I'm genuinely grateful when the cashiers take the time to say a few words. They're sometimes the only people I talk to in a day.

I think it is sad when people cannot have a few words with others, sounding very much like my mother but everyone having mobile phones has impacted the art of conversation, plus for many the ability to look people in the eye if they do speak.

Someone mentioned Booths supermarket, not only is it part of the job description to chat to people, but Booths also were one of the first supermarkets to employ many physically and mentally disabled people. The majority of customers will happily accept some staff on the tills may therefore be slower due to disabilities, but there are still quite a few who just do not have the ability either to converse or tolerate the service will be slower.