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’ve had a look and in Scotland assuming 2 children and 2 salaries of £25k with childcare of £200 p/w it’s £309.96 p/w in UC, cb and Scottish child payment including the max housing allowance. That’s £16,117.92 per year.

Estimated take home for a salary of £25k is £21,292.

So total income would be £58701.92 for the year. Pension contributions etc still to be taken off that.

Two people earning £90k each would get no benefits would get £59,596 each so double the amount of 2 25k earners.

I agree that cliff edge cut offs make no sense and tax free childcare and child benefit should be universal but it’s disingenuous to say that those on higher salaries are as poorly off as those on lower.

Define work harder.

Doesn't a cleaner work hard? What about a teacher or a nurse?

I was with you until you said that.

I pay high rate tax, and I want to keep more of my earned money for myself.

We need to scrap working tax credits (or whatever name it has these days) for a start - why should I pay money toward people who weren’t intelligent enough to get a decent job? If you can’t afford the lifestyle you want, solely on the money you earn get a better job, or get 2 jobs - don’t be expecting my tax to pay for it

33% of government expenditure save right there

Child Tax Credits, should be scrapped - shouldn’t be rewarding people for having children they can’t afford

Free childcare hours .. erm no.. if you can’t afford nursery tough.

Pensions should be slashed as well, they are way too high.

2 child limit on benefits shouod be 1 child

Any Job-seekers allowance shouod be the bare minimum, and maybe paid in vouchers so people can’t waste it on cigarettes and alcohol

… I am not being serious of close, I am thankful for the salary I earn, and I enjoy my job. I understand that, being a member of a society, means that I pay more money towards services than people who have less.

@Amonthinthecountry not really sadly. I don't have any friends or family connections elsewhere in the country and as a non-driver, I rely on the excellent public transport where I am to get around. Moving somewhere else would leave me stuck so I put up and shut up. I have a STBXH who helped with costs but he's recently been made redundant so my future is looking very bleak indeed. I hope I can keep all the plates spinning.

with the salary of £30k you don't get tax credit / universal credit. It is with much less than that

And you need to have chosen to live somewhere with high rent and have both your children in nursery full time.

If you’ve chosen to put yourself in that situation it’s utterly stupid to come and bitch and moan that it’s expensive for you.

The assertion that people on £30,000 are entitled to loads of benefits is utter bollocks anyway- I’m entitled to the grand total of £13.12 a week UC (which I don’t claim because it isn’t worth the hassle).

Well yes.
When dd fell pregnant at 23, she worked out that she got more money working 22 hrs a week than 35 hours once she factored in UC.

I don't understand this at all...... I earn £39k and don't get any benefits except for child benefit which isnt much....

No you won’t- @PAYE is lying. Neither do I or anyone on that income.

How do people earning 50k and 70k have the same take home?

Yes you'll pay more on tax on the extra 20k but it's still worth £12k

On 50k you don't get free childcare hours so it can't be that

Child benefit is only about £150 a month

Is there some kind of single parent subsidy?

As others have said, these are specific circumstances. In some ways UC is a bit of a trap- you can't build savings above 8k, including a LISA, as UC tapers off and a mortgage is completely out of reach as you'd lose the housing element.

well, I have a colleague sitting next to me now who used to live in social housing, got a job on £50k, single female with no dependants, received a council property in London £490 monthly rent in an area where equivalent rents are 2k+ with the right to buy at discount

@coupdetonnerre
I can't believe people get benefits on 30K - I remember 20 years ago being on less with one child. It never even crossed my mind that I should ask for more. I could have been taking home the equivalent of 90K take home pay? Just unbelievable ..... How about that money pays for schools?

Every parent receives £100 per child ( less for second and so on child) - child benefit - as long as they earn less that £60

every parent receives 20% for childcare support as long as they earn below £100kpa

on £30k pa, you don't get any housing allowance, neither you get universal credit or tax credit. You have to be on around £18k pa to get it

The OP says nonsense

Exactly, I bet this will mean we lose people who do valued jobs such as surgeons, consultants etc.

Are you single parents? Of children under 5? I can only assume this might be A Thing

Finally someone explains it appropriately! I don’t blame the people believing you’re on loads at £90k this is exactly what the politicians want everyone to believe, that ‘wealthy’ means £50k plus gross earnings.

because without taxing everyone up to their eyeballs the actual wealthy would get mega pissed off when they’re asked to pay for anything.

That's unfair.

Someone's partner could have died or run off.

£1500 where I live will get you a shitty 2 bed flat or tiny house in a very average area, if you're lucky (not south east)

If you're a sole parent you may well have to work FT, in order not to lose your job.

This is exactly why I haven’t bothered applying for any higher up roles in my current organisation. The higher tax bracket means it simply isn’t worth all the extra stress and bother.

Do middle earners genuinely think they are worse off, and more screwed over by the government, than low earners? Really?

What happens to these incomes when you move out of the childcare phase?

What are pensions looking like?

What happens to housing benefits when the children stop receiving hild benefit?

How much equity do they have then and again at retirement?

What happens at pensionable age when they're still paying rent and likely council tax?

Quite a bit missing from the graph.

But somewhere along the way the children leave home and the high earners still have all the money they earn and low income individuals go back down to a take home pay of around £1200 a month with little support. The high earners have no longer got a mortgage and their take home pay becomes savings/fun money.

Tao to those in high paid jobs who have been on the thread bemoaning it all, your rewards are coming, you will reap the benefits of your high paid job.

The benefits are there for the kids.

Sincerely from someone who is going to spend her twilight years in relative poverty. My ability to climb to the highest paid jobs is probably beyond me now, although I will keep trying.

About a year ago I had a look at entitled to to see hypothetically what I could claim if DP and I separated. I was earning £22k PT then. If I worked FT I'd earn in the region of £50k. With two dcs I would have roughly the same cash in my hand each month working PT with top up benefits than I would if I worked FT (long term progress and pension would be better working FT job but with small kids, I'd of chosen PT in that situation)

Most people just think that anyone who earns more money than them is rich and should be taxed more. Someone earning 3x more than them gross, that's just a prime target.

Unfortunately it's those middle income earners that are actually the engine of the economy, especially those with kids.

Tax them into oblivion and watch your economy crater.

And this is exactly why the constant bleating that “high earners “ should pay more tax is so misplaced.