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
- If you have kids and pay rent, there is little difference in take-home pay regardless of the actual salary
- The net monthly income for someone on £25k in London with 2 kids, is the same as for a £90k salary without benefits.
- For the person in my assumption, their post-tax and benefit income would be just 15% higher at £90k than at £30k
- 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:
- tax-credits/universal credit topping up salaries
- Housing allowance paid to private landlords
- child benefit being removed at £60-80k
- Childcare support removed at £100k
- 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?