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 don't think people can 'will' their circumstances into changing at all, especially if they work in a low paid industry. Take as a given I think people should earn a living wage- with experience, younger people can gain seniority and a bit more pay. They can possibly do a bit of overtime for emergency cash and so forth (I had a colleague who worked as a cleaner in the evenings to earn enough for her first house deposit).
I get the state retirement pension ( a bit reduced, long story) but I would be screwed without my professional pension and there's not going to be any more money of significance, ever, no inheritances to come. I'm not saying I'm poor, I am saying that it's a fixed income and I'm now unable to work to top the finances up. I don't own a house.

We need the tax income we get from higher earners to pay for schools to teach proper economic and financial literacy, so that people don't go around posting theoretical claptrap that doesn't add up or correspond to real world experience on the internet. And more importantly, so that hordes of other people don't instantly believe them without scrutiny, just because it confirms their political biases.

Sadly, it doesn't seem to be working.

Oh absolutely! My Husband earns over £100K so we don’t get 30 free hours childcare wise, which meant I couldn’t justify going back to work - nursery x 2, would have been 99% of my salary. However if we got 30 hours for my first it would have made such a difference.
When I see how much tax he pays a month, it’s wild. For what he earns, I think people imagine a very lavish life but actually, we’re living off 1 salary (albeit good) but if we could put our salaries together and pay tax/get childcare allowances we’d be in a much much better position.

Which bits?

The "net contributor" points?

Income tax is paid by all, but the poorest households pay a larger % of their total income out in tax.

Or posts like the OP which took a very specific set of circumstances and compared them what is available to people on average?

The figures are not reflective for many single parents (I am on a middle income, single parent and take home including benefits is far less), and only apply to single parents. And, isn't there a massive benefit to society to allowing single parents to spend more of their time to be there for their children? My experience has been that kids do better when they have a parent/carer available who doesn't work full time, as opposed to being in full time childcare and their parent being mostly exhausted from work plus trying to fit in all life admin etc that falls to a single parent around full time hours.

Feels like high earners pay a lot of tax to cover the benefits expenses of single parent families. I never understood how they can get benefits and keep child maintenance payments. Surely the second parent should be providing for the kids not the tax payer.

Feels like high earners pay a lot of tax to enable the society that facilitates that earning.

Try doing it without the support of the state.

I'm sorry, you're equating working harder with earning more money?

Much relevant here...

Not me.

Lost of the "high earners" do though.

I think high earners need society to function to facilitate their earning.

The fact that so many do not pay for their own kids is appalling.

Before everyone burns up in a fire of resentment it's important to caveat this.

These numbers only relate to the small number of years where 2 childcare bills overlap. For someone paying high rent. For single person family households.

In reality they just show something we should have been aware of years ago - that we live in a rentier economy.

The average person's standard of living is massively compromised by paying over the odds for everything, especially housing costs, which ultimately benefit land and capital owners.

This is capitalism. No-one wins. Except those with capital.

Go on entitledto and see if you would get a benefits top up them. If your circumstances are as outlined in the OP then you would.

I’m not one bit surprised at the OP. Women (because it is usually women) regularly post in the boards to say that they are thinking of going part time (as a single parent) and can’t believe how much money they will get - can it be right? And it is of course. Although someone will always say they can’t believe the OP is telling the truth or that they are just being goady. The information is right there.

I think it’s time that absent fathers (or mothers if relevant) were compelled to pay their maintenance into a State account if their partner is claiming benefits and what they pay be deducted from the benefit award. The state paying the resident parent so the amount would still being the full amount even if the absent parent doesn’t pay. Don’t forget that on top of these figures in the OP maintenance “doesn’t count”.

At the moment parents can live separately and the state will pick up the tab for any shortfall in the resident parent’s income no matter the earnings of the absent parent.

Living standards have dropped for the majority of the population in the last 14 years including those earning under PAYE in the higher salary brackets. It is those with considerable assets (wealth) such as owning considerable amounts of stocks and shares and multiple properties that have done well under Tories these last 14 years as both stocks and shares and housing have surged in value whilst wages have stagnated.

The super rich globally have of course benefited the most. In 2010, when the Conservatives came to power, there were 29 billionaires in Britain. There are now 171. In 2021 there were 24 more billionaires than in 2020 - the biggest jump in its 33 years history.

The cumulative wealth of the top 10 billionaires in UK grew from £47.8 billion in 2009 to £182 billion in 2022 - an increase of 281% whilst wages stagnated between those years. The super rich are often paying tax at lower rates than wage earners paying income tax with its higher rates. Government should make them pay their fair share which they are not doing currently all whilst their wealth has soared as the financial markets where much of their money is invested in have benefited v well from quantitative easing, govt borrowing etc

Over the past 20 years, 83 out of the richest 250 individuals on the Sunday Times rich list donated over £60 MILLION to the Tory Party. It's almost like they know what to invest in..

Sorry OP but your figures are all wrong, try using turn2us and see if you get the same figures. It's much more accurate. I think you've misunderstood the calculator too.

Your income is taken into account for UC, so the more you earn the less UC you get. the threshold if you get the housing element is quite low. so for every £1 you earn you'll lose 50p in benefits. There is also a benefit cap so you can never be better off on benefits than working. meaning in london you can never receive more than 1.9k a month in benefits. If you're earning 25k after your deductions to your UC, you wouldn't be 1.9k anyway.

As a single parent on UC i agree i don't push myself to work full time as i have a toddler and with the benefit too ups i end up with about £300 less a month compared to a full time salary. For now, I would rather sacrifice £300 and spend more time with my child. When they go to school i'd up my hours as it'd be worth it. (£300 extra without accounting for additional childcare costs)

It’s quite frustrating when I work full time on 25k a year yet our caretaking team, one of them refuses to work more than 12 hours a week because it affects her benefits. On top ups, council tax and rent reduction plus many other bits, on paper she’s a heck of a lot better of than me and my colleague each month. I don’t get it. Her partner and father of her kids has a really well paid job but she doesn’t disclose that he lives with her when he clearly does so she can reap the benefits, literally!

Because if someone can’t afford a child without state support they should not have it.

therefore it should be equal or non existent.

That is a different issue all together - benefit fraud. And single parents are expected to work 30 hours now under Universal Credit.

You do realise that the maintenance amounts are really relatively small, in comparison with benefits? And that benefits are already hard to exist on - maintenance might sometimes be a lifeline. In terms of making the other parent pay more, the simple fact of the matter, is that there are now two households, and with property being so expensive whether to buy or rent, two incomes may not cover both households. There are no easy solutions. Marriages sometimes don't work out/partners are abusive/have ill health/women become pregnant unintentionally, but better that children don't grow up in unhappy homes? But again, the OP's diagram is not accurate, and applies only to single parents whose kids are in nursery and who are renting.

Working in money advice I had a couple with two young kids that were on much more than me working full time in a responsible job. And neither of them worked at all.

But they were four people and you were one? And presumably they were not working because they had health issues/caring responsibilities/were made unemployed and looking for work? Responsible work (what is an irresponsible job)?

@allthemiddlechildrenoftheworld
You pay slightly more in Scotland.

@PAYE I'd certainly rather be on 90k over 30k every day of the week.

I don’t agree. These circumstances are usually temporary childcare in particular for maybe 4/5 years. After that the person on 90k goes back to getting a lot more, plus there are more likely to own their own property, being paying into a big pension etc.
25 to 30k needs to be subsidised otherwise quite simply they could not afford rent and work would be pointless as childcare would cost more.

You don't have to. You could not send your child(ren) to private school.