AIBU to feel disheartened by earning into the higher tax band?

[Chocolateapot]

I have finally after many many years of studying progressed in my career to just slightly above the 40% tax threshold. Unfortunately I’ve realised this now means any additional income I earn is now taxed at 40%, student loan 9% and 2% national insurance, essentially giving a marginal tax rate of 51%.

Not sure why I bothered tbh

DH dropped a day to 4 days a week, he found the extra time more valuable than the extra money.

I think this is what I’m going to do. It’s not worth that extra day of stress. And this is another reason why the NHS waiting lists are so long…

A scottish graduate would not be paying 9% loan repayment - take home is higher

Labour taxes for the average worker are lower than the OECD average and much lower than our closest European neighbours.

I frame this differently. I'm fairly marginally in the 40% tax band, and anticipate that in the medium- to long-term I'll go significantly deeper.

However, I won't view this as earning more money. I'll view it as earning more time off. We can buy holiday, so I'll keep my money below the threshold by doing this. Once I earn enough that a 4-day week will earn me around the threshold, I'll move down to 4 days. I'll do the same if I earn enough that a 3-day week will do the same.

Once you earn around £3k a month, an extra £500 or even £1000 can't buy as much happiness as the time doing things other than work will.

Where I am that's kinda normal. We have the highest taxes in the world. We work for the govt and they let us keep a little to get by.
Hate how little we get on pay day vs how hard we work.

Oh thanks. My income is lower atm but previously over 50k and lost it, as a single income household 😡

You can do salary sacrifice pension pot (for us its called AVCs not NHS but public sector) and it will bring you under the threshold or if the NHS offer buying holiday that's another one.

I'm in Scotland where to be a higher rate tax payer amount is a lot lower then RUK (£43,633) and is more 42%.

I decided to use AVCs - I still pay a shed load of tax but the difference of AVCs is that my take home pay is about the same without it but I'm also saving for earlier retirement without the reduction hit on my public sector pension.

I moved into the higher tax rate at a later age and honestly how much tax I pay doesn’t bother me, I am just feeling lucky that I have managed to get here. I say that as someone from a family where 30k seemed an amazing wage, no one in my family or friends have ever paid higher rate tax so maybe that colours my views.

And this is one of the reasons the election results went the way they did.

That would be a single person. That’s quite different to being a single parent, with two or three children, some childcare still needed.

A woman in a council or HA property, having rent and council tax mostly paid, with a couple of young children would probably be as well off/ better off on benefits as earning £50k, much less so with a mortgage. Benefits attract free school meals, free prescriptions (adult), free childcare, Cold Weather payments, NI credits, and don’t forget some partners (not officially living with them) contributing financially.

Same, this is trotted out all the time ‘oh I’ll just go on benefits’ - fair play to you if you can live off £500/600 a month. I’d struggle with that.

Might have escaped your notice but benefit claimants who have fallen out of work, or who claim UC top ups are tax payers too, as are many on sickness benefits. There are ma claimants who use the system according to its original intention - to pay in when you can and take out when you need to. And fiscal drag is it work of the Tories - not normally known for their socialist ideals.

Same here. It helps that even £50k is far more than I need to live on, so anything above that is a bonus.

@southcoastsammy don't be disingenuous. The amount of benefits a family with DC paying rent and childcare will be far more than a few hundred pounds a month. It can be many times that, especially now the 2 child limit has stopped, and can really close the cap between low earning families and those earning a lot more but not entitled to any help.

How are you on Plan 1? I graduated 11 years ago and am on Plan 2?

Don't feel guilty about feeling this. You are absolutely correct. Socialism is a great thing, but only if the socialist contract is adhered to by everyone is the society - i.e. nobody is sitting on their arse being lazy whilst others work. I had the most amazing experience witnessing socialism in real life, as a student, on an exchange trip to the USSR. What an eye opener. Everybody there was paid roughly the same salary - i.e. surgeon/bus driver/teacher/shop assistant. And nobody whined about the disparity - because 1. everybody worked hard and 2.accommodation/education of the highest sort/music schools and sports schools/holidays only cost a nominal amount or were free. 2.it was illegal not to work - it was a crime not to work and people who refused to work were sent to labour camps. So everybody worked and nobody took the piss. The most curious story was that of the great poet and dissident Joseph Brodsky, who was a poet and was writing poetry, but the state publishers refused to publish him - he was sent to a labour camp for 'social parasitism'. You are right to feel flat.

It’s outrageous.

I lose £25,000 at £100k for earning >£100k.

Because income at this level is taxed at 62% (then 47%), I need to earn more than double that to recoup that £25,000 of lost benefits.

So I am £0 better off earning £155k vs earning £100k.

It is completely insane. ‘Put it in your pension’ people will say - but in HCOL areas people actually need the money to live off.

So, open up a SIPP and pay monthly contributions into it. You will get 40% tax relief on every penny you save - a nice annual refund from HMRC. When you finally draw your pension you will get 25% of it tax free and pay 20% tax on the rest (if you drawdown wisely). You will be so glad you started investing early (unlike me, who is coming up to retirement but didn't start until later). I cringe at all the tax I paid unnecessarily during my career.

The thing is, people actually need the money to live on.

Housing costs are very high. Childcare costs are very high.

These frozen thresholds and the solution being to put more and more into pensions, means people’s incomes effectively have an upper limit and for some reason many think that’s fine… ignoring inflation…!

Ive paid of ….. drum roll £189 in TOTAL.

You've paid more than this in real terms. Because the value of the loan is eroded by inflation and that's been highish recently. So a £30000 when you graduated loan would be more if you translated it to today's money. Having said that there are a lot of issues with student loans!

Also if your salary is just over the £50k threshold than your pension contributions will naturally bring you under. So are you sure you have actually moved into that band in real terms?

Can you add to pension as salary sacrifice? At least you will eventually get it.

Why don’t you move somewhere where the income tax rate is very low but you are responsible for paying any medical costs and private insurance?

And for those saying they wouldn’t mind paying higher taxes if services improved: prices are rising for medical services to be offered so you’d have to pay significantly more tax to pay the increase in costs as well as invest in better services.

It's absolutely crazy - i recently entered a higher tax band and as a result all the interest in my savings are taxed at 45%.

This means that the interest I now earn on my savings is lower than the rate of inflation. Which means I'm losing money I put aside - which I'm putting aside simply to move out of what is essentially an ex council flat so I can buy a house.

This is the number one reason I despise the Labour government!

Yeah.... Because everyone pays it....

As a single parent, if I were to get full UC it would be £1100 a month for me and my DC plus CB.
So approx £1200 a month in total.

Thats to pay my rent and all bills like water, electricity, food, transport, school uniforms etc for both me and my DC.

If I didn’t have DC then it’s about £300 a month = £75 a week.
You get your rent paid on top but that £300 a month is to pay for everything else, including transport to job centre appointments and interviews.

If you are in a £50k job, that’s over £3k a month.

If you think living on benefits is better than a £50k job then by all means give your job up and go on benefits but you obviously won’t because you know you’d be worse off.