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?

One income, I’m unable to work due to disability (which doesn’t bring extra UC).

I suddenly (overnight) became severely disabled AFTER I had my son before anyone points out I shouldn’t have reproduced.

Child now over 5 but it was the same then when we used nursery (possibly not to the penny but within a couple of quid)

You have missed the point. In the South East housing and childcare costs mean that those with 'high' salaries have the same take home income as those on benefits.

So yes, they are totally screwed over.

So you can only be bothered to give the calculations that paint the picture you would like to be painted, rather than a true picture.

Take it you are a Tory, who would like to see the gulf between the rich and poor grow ever deeper. We are not stupid you know.

The situations are in no way comparable as you well know.

Isn't this all to do with high marginal tax rates?

Indeed. Desperate attempt to affect the election results and hold on to their privilege.

This ,can genuinely say that the carers working at relatives care home work 4-5 12hr shifts to pay their rent! Haven’t spoken to one carer yet who is looking forward to a holiday,they don’t drive and all look absolutely knackered !
So yes please define HARD WORK .

The other issue is if you have a very high earner in a couple with someone who is on minimum wage level and you have kids.

You don't get any tax breaks. You don't get child benefit.

If you use childcare you don't get anything towards it. The lower wage earner is better off not working otherwise it costs to work!

If you have two earners on £45k each, you end up financially much better off than a single earner on £100k plus with a stay at home partner.

It makes no sense, and it can trap the lower earner in a relationship as they become financially dependant. It would be fairer and better to be able to transfer tax allowance to the other partner so that the work they do looking after the children is actually valued.

You could argue that the benefit is the work / home life balance but quite often if you have an earner on that amount they have to work longer hours, so you can't even necessarily argue it as family time.

Its a nonsense and people just see the big wage number, not the take home pay nor impact on a lower earner partner, because they don't understand it.

And THIS is the real issue.
I agree that the figures are problematic. For one, childcare for pre-school children is only a very short period. Unless you have loads and loads of kids. It shouldn't be used as an example of work not paying.

However, the attitude to higher earners is that. Instead of them paying and benefitting - as occurs in the Scandinavian utopia - they're expected to pay twice!
Hand over a wodge of cash for everyone else, and then pay for themselves

There's a graph from the IMF that demonstrates, contrary to popular perception it's the lower earners in the UK that pay too little in income tax compared to other European countries.

DH and I could earn a lot more but there's little point especially as we TTC. We might as well both go PT, save ourselves the childcare costs and then re-consider when kids older.

Interesting graph.

But it doesn't take into account the decades people work without children and don't get benefits. It also doesn't take into account having investments such as buying your own home and pensions.

So short term while raising children it might seem not that different, but over a lifetime those earning higher and investing in their homes and pensions are MUCH better off once your children have reached adulthood, where those reliant on benefits and haven't built their careers suddenly have nothing.

I know which group I much prefer to be in and absolutely stand by those earning £90k should not be entitled to benefits. The grass isn't always greener.

It's painful. Plus the difference between £65k and £70k is about £20. Twenty quid?

Actually there's a lot of doctors who are refusing to work over a certain number of hours because of the tax implications and it becoming financially illiterate to put in overtime past a certain point.

My BIL is in this exact position.

Given the back log with the NHS this makes NO SENSE and it quite obviously has the unintended consequence of not helping waiting list.

Have a google on this subject. It should pop up.

So I don't think this is a Labour v Tory thing. I think its a tax issue which needs looking at for the benefit of everyone tbh.

You are absolutely right

I don't either - but that is because I live in a house with 2 incomes. If I was a single parent earning my current wage, I'd get help towards my rent and childcare. I'd get £1600 a month in additional benefits on top of what I'd get from my 50k wage

Yes I do. Between the lack of childcare support access, nursery bill, large mortgage on very normal house and the 60% tax trap I feel heavily burdened by the system. I can’t reduce my hours as my job is full time and my nursery bill has gone up another 10% to cover the funding gap after a 12% increase 6 months ago. The system is broken, it needs to get the people and companies with actual wealth to pay more and stop squeezing the working people who are stuck in the middle.

People also don't understand the difference between income and wealth.
Most truly rich people don't earn a salary. They have investments representing their net worth.
They take loans against said investments and pay the interest for spending money etc.

Income taxes are a populist way to go against the 'rich' because of this ignorance. But it doesn't work in reality.

Sorry, but I’m on 50k and my take home pay is 2945 plus child benefit so just about 3000, I’m not entitled to any other benefits despite being a single mum. According to your graph I should be getting much more but this is not correct, there are no universal credit top ups etc available, so I don’t know what the graph is based on, but it’s not correct

I spent a number of years claiming tax credits. I would rather earn the money in the form of a salary, benefits go down as your children get older and eventually tail off. When My daughter turns 18 next year and will lose her child benefit, maintenance and pay increased council tax.

I've been planning what to do about it for a number of years. Increasing my salary to cover those costs has been number one on my list.

I could not agree more - there is no benefits in working hard and earning more.
I had a conversation with some friends last week end about how 50k is not what it was 10 years ago and should NOT be taxed at 40%. Over the years everything has gone up (utilities, mortgage, council tax etc), so earning 50k should no longer be considered a high wage. People on lower wages are better off as they pay 20% are entitle to child benefit and may be other benefits but anyone over 50k loses child benefit etc.......disgraceful and disgusting state of taxation system.

My thoughts exactly. I am not a high earner, BUT I would always protect my pension. The years we work with children is not everything (although it can seem never ending at times!)

I don’t think they probably do, no.

I do think a lot of people feel absolutely skint on what are technically good incomes and that breeds resentment in general.

The situation around childcare and housing being particularly extreme.

I think the expected middle class lifestyle hasn’t really come to fruition for many people under 40 in Britain.

Tbf most of this doesn't apply to me because I only work part time, am not a higher tax payer, because I never had much childcare costs all those years ago, now uni costs. And a mortgage ending in a few years. But I'm enjoying the interesting discussion.

Tell your friends to look up fiscal drag