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?

Agreed.

I’m happy to pay lots of tax but I’m not happy to be excluded from this huge financial benefit that I am funding for the other 99% of parents.

With two kids I’m basically working for free three months a year.

The removal at the same point as the personal allowance also makes it even more painful.

Yep us too. 🙄

You think those earning those amounts should be subsidised?

Part of the reason for this mess is the policy of selling council houses at a huge discount.

The council builds the house, but is then obliged to sell at a large discount below market rate to the tenants. The tenants then move out, and rent it to UC claimants for a much higher rent with the council then pays.

It is a criminal waste of state money.

You should have been paying VAT on them from day one, so see it as how much you've saved to this point.

But private schools should be taking the hit on them, or at least meeting parents halfway. They've been benefiting from them as a legal loophole years to offset tax so they should be the ones stepping up now the gravy train is ending.

Do they, though? I don't actually see that many high-earners going and getting £30k jobs - do you?

They might reduce hours a bit while their kids are very young, which I wouldn't say is the end of the world. Most will pick them back up within a few years.

In some respects it does. I was working 4 days a week and considered going FT when my kids were at school. I didn’t do it because I was on the edge of the child benefit taper. It wasn’t going to be worth the stress, reduction in time available for housework etc. Then they increased the child benefit threshold so I increased my hours.

I think data are needed on how frequently these (probably edge) cases come up.

Just because it's theoretically possible doesn't mean it's happening that much.

Free childcare and universal basic income for all

These changes in behaviour can amount to a huge reduction in productivity at population level.

and affordable council housing

Yikes! That’s a massive mortgage. Are you tempted to sell up and move somewhere a bit cheaper?

Fucking hell. There are people who skip meals to feed their kids, people wearing clothes they can't afford to replace, people who freeze every Winter because they are so scared to put the heating on but no lets save the moaning for private school VAT fees and high mortgages on large homes instead hey?

Are people this jealous over what people on lower incomes get?

The calculations look about right for the assumptions made, but actually only a small proportion of people will fit those assumptions. I'm a single working parent in the middle of that range, two kids, and my take home is about half that shown, because my kids are a bit older and I can work flexibly from home (so no childcare costs) and because I pay a mortgage instead of rent that isn't taken into account for benefits (rightly so). But this does put me off chasing a higher paid position - for more stress and less flexibility I would only be very marginally better off each month and until the kids are independent the trade off isn't worth it.

I'm on 45k in a Scottish city with a nearly paid-off flat and no dependents. Secure WFH job (so no commuting costs etc). I hardly think of myself as Jeff Bezos but tbh I have more disposable income than some folk on 6 figures. (And less stress). So YANBU OP, the top line salary can be misleading.

I'm not sure I really understand, sorry.

I earn 30k and take home nearly 2k, as per the light blue, no benefits bar. Apart from child benefit I'm not eligible for anything. I don't see how i could ever claim almost double my salary and get near the 90k takehome, no benefits monthly money of 4.5k.

Housing benefit and childcare costs must be an enormous part of the calculation but tbh I'm not sure I'd want kids homeless or a single parent being forced out of the job market for a number of reasons.

Whilst this stuff can feel unfair because there is a perception of someone else getting something for free while i am slogging away, I remind myself that I have choices those people can't buy. I can choose my neighbourhood, live in a good area away from problem neighbours etc.

It's not all about having money in my hand at the moment.

@MidnightPatrol I'm bumping this because you keep saying you don't get childcare support/free hours. You can very much still get the free hours unless you're earning over £160k. You keep the money invested in your pension too

I’m sure I read somewhere that the salary from where people stop feeling a buzz whenever they get a salary increase is £120k, now it makes sense why that is 😅

It is this attitude which has resulted in this mess.

By objecting to higher earners getting any 'subsidy', we have this crazy situation where take-home income can be pretty much flat as low earners are subsidised, and high earners have child benefit/childcare help/tax allowances removed.

The result is an incentive for everyone to cut their hours, and then we wonder why there is a productivity puzzle.

How much would you set universal income at?

This last point you made is very salient.

It actually reminds me of the whole brexit debacle.
No one was supposed to / allowed to voice any opinion other than pro-remain (or benefits are great! I love being taxed up the arse!)

Because if they do you are a hateful ignorant arsehole. You need to sit down and shut up... #NoDebate etc etc

And look what the lack of reasonable discussion and debate led to there....

Its not individuals that are the issue its the system. It needs radical reform urgently.

But again, just to confirm - by 'everyone' you mean single parents of two children under 4 who rent their home? Not, in fact, 'everyone'?

But why should I have to save £60k a year into my pension during the years I have preschoolers?

What is the purpose of that, from the governments perspective?

My priority at this phase in life is not locking up earnings for 30+ years into a pension scheme on which the criteria keep changing.

And of course - this doesn’t help the government either, as people are paying less tax receipts.

But is it, though? I don't know what percentage of workers it applies to.

Aren't the left allowed to question things, too?