Tax in UK

[aspiring]

My friend is moving to Australia as he says earning over 100k is a ridiculous benchmark for excessive taxation.

We got debating whether 100k should be the cut off considering is it actually a 'rich wage' as such when you have millionares earning 500k etc.

So question is should the tax be so excessive at 100k?

 

[aspiring]

The point is that 100k doesn't mean you are rich. That's like the entry level salary for a single person to buy a flat in London. The point being that the UK shouldn't be taxing people a higher rate when they can only afford the basics. The 500k is just a made up number to illustrate an income which would be significantly more comfortable to live on.

100k as per your example isn't pittance.

1/5 of everything you earn being taken is a lot of money, regardless of how much you earn.

100k according to following arricle is 3 times average in London?

Is £100k a Good Salary in the UK? | My Money Yard

Overall, £100k is a good salary in London. London is the most expensive area in the UK and it is also where salaries are the highest. Six-figure salaries are

mymoneyyard.com

 

[aspiring]

I'm not sure what the comparison point to "millionaires earning 500k" is trying to make?

You have billionaires earning 100million+ each year... You earn more you pay more tax (at least that's supposed to be how it works). If he doesn't like that, he can either find a lower paid job to pay less tax (said no-one ever). Or go live somewhere he doesn't pay so much tax.

The debate on this is around is 100k a large enough salary to be taking the 60% tax on instead of setting that at 300k for example

 

[aspiring]

100k is a lot to most people (it would be to me)

100k isn't so much in London if you're single

But earning 100k for a good chunk of your life.. You're going to do OK, London or not. You might not realise your wealth until later though

Why would you say 100k is not enough in London. The average wage in London is around 40k no?

 

[aspiring]

The biggest problem right now is that inflation has pushed more of us into tax brackets that haven’t moved. I don’t even bother going for promotions anymore, there’s no point when so much is lost to the government.

As for 100k, it depends where you live. You’ll still live well, but in London most of that gets taken through higher costs.

This is the problem. Current set up means more people do not want to work harder for less pay

 

[aspiring]

You just need to pump that extra cash into a pension and hope the government don't then hit that as well. Pretty sure Labour have said they will clamp down again on pension payment allowances when they come in though.

Even then private pension pots are not guaranteed though?

 

[aspiring]

Yeah. The more senior people at work are past (in my opinion) the sweet spot. They get a little more money, for a lot more hassle. Invariably they work longer hours too, due to "coming with the job".

Not for me.

So true. These days promotions equate to line management and very little reward

 

[aspiring]

What do you mean guaranteed? They would be protected by financial regulations - they are still your funds even if managed by a company. Markets need to drop a huge amount to wipe out the value of that investment by 60%!

Well the investments could go down significantly compared to what you put in?

 

[aspiring]

This 100k isn't really that much. For a single person, sure, but for a family person with a couple of kids, it's amazing how little you're left with. We should just have a flat tax rate for everyone.

Once you get to 100k you just increase your pension contributions and so on to try and keep underneath it - or if you're earning over 125k you have no more personal allowance... At that point in time you can possible start asking for shares/dividends etc... but it's daft to think that people don't try and minimise their tax liabilities (legally) - they do that because the system penalises people who earn well.

100k isn't that much?

You got to be joking.

Its 6 figures

 

[aspiring]

And? does that magically make you rich? As Jokster said you effectively get taxed at 60% as soon as you go over 100k. Which is why I suggested we need a flatter tax structure.

Yeah but you can save tax by doing pension contributions so not 60%

if someone earns 100k how is that 'not enough'

If you earn 100k your in top 5% in UK?

 

[aspiring]

Yes there's a lot of tax reduction techniques, which is great as it boosts your pension contribution. That's just 100k, as you start to move up higher and you start eating into your personal allowance more it becomes trickier, unless of course you can get share options or alternatives. i.e. bonuses can get paid directly into your pension instead to avoid the massive tax hit. The thing is you also have a to do a self assessment as soon as you earn over 100k. So in general earning over 100k whilst it sounds impressive and a lot, isn't suddenly a door of luxury.

Scuzi posted some figures above, ok 5.2k after tax isn't bad... but if you're the only earner, it doesn't spread that far. I'm not using myself as an example - I haven't disclosed what I earn on the forums, I'm not interested in doing so. All I'm doing is basing it on what it could mean for a family of 4 as a main earner whilst 100k sounds like a lot to someone that has never earned 100k, and seeing it on paper it sounds impressive. However as always you spend to your means. 100k doesn't suddenly mean you can afford a luxury car, go on 3+ luxury holidays a year. 100k does mean you can pay your mortgage, pay your bills, give the kids good experiences, and put a little aside for a rainy day. In terms of "fun stuff" you still have to save for a months - it's not as if you can suddenly drop 2-3k on something frivolous in an impulsive manner.

As I said, if you were single, or in a relationship with no kids, then it is likely that your other half would be working as well - your household income then does suddenly become quite significant, and it does open up a more luxurious life. Generally people who earn those higher salaries are older and more likely to be family people. Of course that's just a sweeping assumption but probably has an element of validity?

If you earn an overall income of 100k, if anything that gives you a comfortable life.

Agree with you that it doesn't suddenly mean you can go on 3 luxury holidays etc but for sure it gives you a very reassuring and good lifestyle.

Your points would make more sense at 50k for example where the net income is less.

100k puts you in top 5% of UK earners so there must be some good reason people talk about it as a very good salary?

 

[aspiring]

I wouldn't say very reassuring lifestyle. If you're a family of 4, it means you can cover the bills, and probably go on a holiday, and not shop at bargain basement for food. However it wouldn't mean luxury car, or be frivolous with your spending. I mean Scuzi's example, 5.2k after you take off mortgage, bills, utilities, food, childcare, car(s), commuting, council tax, other bills (phone, insurance etc..), hobbies, fuel, etc.. Sure you'll be left with a positive balance, but it still means you need to save up for stuff like holidays and so on.

Remember you tend to live to your means, even if you try not to, it's only natural to do so.



Oh I realise that - I was sort of agreeing with you agreeing with me!

What do you mean by reassuring? 5k net a month should certainly give you comfort even after all those things?

 

[aspiring]

There is not point working harder to pay more.
100k is not a rich wage these days.
Problem is wages at the bottom have not kept up with inflation and the bands have not kept up with inflation.

These days mobility is the key towards keeping more of your earnings.

Therefore if the opportunity arises then take it.

Mobility outside UK?

 

[aspiring]

All depends how much all those things are... If you have a 2.5k mortgage and expensive childcare then that 5k isnt going to go that far.
If you have a 1k mortgage and low child care costs (say if you have kind grandparents or whatever) then it will.

I expect the average person earning 5k/month isnt going to be living in a £700/month house

So what would you say is a comfortable wage to bring 2 kids upon?

 

[aspiring]

The free services are crumbling because people are living longer and more people seem to be getting ill.
Private healthcare ive had recently has been 100x better than state care.

Don’t know, i think it would be fairer to pay for what you use and pay for your own private healthcare (not you, i mean generally for everyone)

It boils my **** when family members (sort of family) talk about getting their pension when they have never paid a single bean into the system, live in a council house on benefits for 30 odd years.

Free services also crumble due to nature of misuse. Some.people take the NHS as a joke and abuse it. Those need paying tbh.

 

[aspiring]

Not fun?

Even at the "60%" tax bracket, based on an average work week etc. someone earning 100k is making over £20 an hour after tax, at the high end (£125k) it's £25.60 an hour after tax.

Average hourly wage in the UK is about £16-17 per hour before tax. It's kinda hard to feel sorry for the ~3% of people this affects.

This is the bit I am not getting either. Some are saying 100k is not sufficient or a good wage which is baffling.

I mean your calculations are based on 60% but actually it can be done for lower no doubt

 

[aspiring]

Right?

And that's only between 100-125k. Earning before that are at a much higher rate.

Yeah it is weird to say 100k is not good in current climate or even economy prior.

What do you mean earning before?

 

[aspiring]

Re the 100k paradigm.

It is a good salary. When you get there though, not as good as you’d think (is what I am hearing).

There does come a point where even at the 45% band it’s a lot of tax, but it’s also a lot of take home.

The 100 to 125k personal allowance taper isn’t widely known (outside these forums of course!) so catches people out which adds to the sense of surprise.

But you can easily save PA by pension contributions so take home is still a lot

 

[aspiring]

One thing to balance the 60% tax at 100-125 is the majority of people that earn this amount of money are simple Joe high earners on PAYE.

It encourages you to put all over 100k in your pension to bring your earnings down and not pay tax on it.

Sure some people would want that money to spend, but most people find 100k+ more than enough to cover costs and have a relatively financial stress free life and know that they are building a good pension for retirement.

Only.problem here is.private pensions could crash unlike NHS pension

 

[aspiring]

£100k would not leave someone living in an average house in London with much spare. I live in a decent bit of London and “only” have £350k of mortgage left which I’m paying about £2k a month on but next year that rises to about £3k. That’s £36k out of the £64k (after tax and 5% for pension). I have living expenses of £24k for my entire family per year. This would leave a buffer of £4k.

Could live outside of London and save?