Tax in UK

[Murf]

Salary is subjective. What you consider a “good” salary might be totally polar to what others consider based on experience, industry etc. Against the average - yes (maybe), you could say it is good. However, this is a really bad example but go ask a CIO of a fortune 100 company if "100K" is a good salary.

Let me take the subjectivity out of it then, as that's a fair point.

On average, £100k per year is a very high salary as it is earned by less than 4% of the working UK population.

 

[Murf]

Spoken like someone who has clearly been earning well for long enough they've lost touch with the reality of life for an average earner.

Indeed. I'm fortunate enough not to worry about how I'm going to pay bills month to month or seeing overdraft charges rack up on my account. However, an extra £2,500 a month for the third of UK households that are living pay cheque to cheque I'd imagine would be life changing. For the 11 million people in the UK in relative poverty I'd argue it would be life changing as well.

https://commonslibrary.parliament.uk/research-briefings/cbp-9209/

 

[HACO]

Let me take the subjectivity out of it then, as that's a fair point.

On average, £100k per year is a very high salary as it is earned by less than 4% of the working UK population.

The point is, with a £100k per year income you're not going to meaningfully go up the wealth ladder in the UK.

To be in the top 4% you need a wealth of £2.2 million. You will never get to that wealth earning a salary like that. You can see why a salary of £100k isn't that meaningful when it comes to measuring if people are well off or not.

In fact, you can be in the top 5 or 10% of the population in terms of salary and never reach the top 50% in terms of wealth.

 

[LiE]

Take home on £100K is roughly £67K

Take home on "outlined average" is roughly £34K

£33K PA a year; £2,800 monthly difference. Hardly lifechanging; as outlined it will be relative (could potentially afford bigger house, 2 cars) plus you lose things like child benefit and loose child care hours

The key is keeping your outgoings in check and not getting carried away with lifestyle creep.

If you can afford to stick £2,000/month in a savings account then that £24,000 per year opens up tons of options you wouldn't usually have.

But of course if you go for a big PCP on the nice merc, get a 5 bed house for a family of 3 in a nice neighborhood and blast money on fashion and tech, you'll eat into that very quickly.

Short term our household salary is feeling squeezed due to opening a business and some poor financial choices, but that will change in the next 3 years. I'm heavily focused on reducing outgoings to the point it will be transformative to our finances.

 

[Freefaller]

People are fixated on individual earnings and not considering it as a household income which is a better reflection of society.


Salary != wealth.

You can earn 100k but have absolutely little net worth or cash available.

 

[Lopéz]

Take home on £100K is roughly £67K

Take home on "outlined average" is roughly £34K

£33K PA a year; £2,800 monthly difference. Hardly lifechanging; as outlined it will be relative (could potentially afford bigger house, 2 cars) plus you lose things like child benefit and loose child care hours

If 3 grand a month extra doesn't change your life then you're going wildly wrong somewhere, surely?

 

[throwaway4372]

If 3 grand a month extra doesn't change your life then you're going wildly wrong somewhere, surely?

let me spend that for you:
- 1k into pension to plan for retirement and reduce tax bill
- 1k into mortgage, either having a better house or making overpayments
- 1k into saving/investments, or spent on a better car or whatever.

now you've used that 3k wisely and your life continues as before.

 

[Lopéz]

let me spend that for you:
- 1k into pension to plan for retirement and reduce tax bill
- 1k into mortgage, either having a better house or making overpayments
- 1k into saving/investments, or spent on a better car or whatever.

now you've used that 3k wisely and your life continues as before.

No, you've changed your life. You didn't just hurl the money out of a window, or blow it on pizzas or whatever.

 

[Murf]

The point is, with a £100k per year income you're not going to meaningfully go up the wealth ladder in the UK.

To be in the top 4% you need a wealth of £2.2 million. You will never get to that wealth earning a salary like that. You can see why a salary of £100k isn't that meaningful when it comes to measuring if people are well off or not.

In fact, you can be in the top 5 or 10% of the population in terms of salary and never reach the top 50% in terms of wealth.

Can you provide the source for your wealth ladder? Salary is one of the main factors in measuring if someone is 'well off' or not. Yes, financial commitments, lifestyle choices etc. also play a factor. But salary is certainly a meaningful variable.

The initial point of this thread was the frustration that people earning 100k a year are taxed more. Considering that's the top 3.5% of earners, that still seems fair to me. That some posters want to claim hardship for those in the top 3.5% of earners, fine. 100k is statistically a high salary, whichever way you cut it. How effective an individual is at investing that salary to increase their wealth, yup, that's gonna vary.

Choosing to have kids, or marrying someone who isn't planning to work doesn't impact whether that salary is high or not.

 

[Mrwong]

Look at the wage both in the center.

	Price		wage	Multiples
one-bedroom flat in Manchester	£195,000.00​		£34,000.00​	5.74​
one-bedroom flat in London	£375,000.00​		£34,000.00​	11.03​

 

[Freefaller]

Can you provide the source for your wealth ladder? Salary is one of the main factors in measuring if someone is 'well off' or not. Yes, financial commitments, lifestyle choices etc. also play a factor. But salary is certainly a meaningful variable.

The initial point of this thread was the frustration that people earning 100k a year are taxed more. Considering that's the top 3.5% of earners, that still seems fair to me. That some posters want to claim hardship for those in the top 3.5% of earners, fine. 100k is statistically a high salary, whichever way you cut it. How effective an individual is at investing that salary to increase their wealth, yup, that's gonna vary.

Choosing to have kids, or marrying someone who isn't planning to work doesn't impact whether that salary is high or not.

The point is a high salary doesn't not equate To wealth as most people on higher salaries are usually married with children. Looking at it as only a salary is not really offering the right perspective. Household income is far more appropriate.

Yes 100k is a good salary, I don't think anyone is saying it's not, however it's not this miracle salary that suddenly makes you rich.

You still have to save up for luxuries in life. Sure you save up quicker, so yes you can buy more stuff in a shorter time frame. But that's about it.

 

[krooton]

£100k would be a lifechanging salary for my household, even though it would 'only' be around double what I earn.

How so you ask? Well my wife would be able to stop working entirely, and we'd still be up like £1k per year. Sounds lifechanging for a household to me.

 

[HACO]

100k is statistically a high salary, whichever way you cut it. How effective an individual is at investing that salary to increase their wealth, yup, that's gonna vary.

That mostly relates to taxation, which is pretty much makes sure those earning good salaries will not become wealthy, as taxation on that income will be incredibly high and crippling. And the other side of it is that those who are wealthy are not taxed at anything close to those rates, so they will remain wealthy.

 

[Freefaller]

£100k would be a lifechanging salary for my household, even though it would 'only' be around double what I earn.

How so you ask? Well my wife would be able to stop working entirely, and we'd still be up like £1k per year. Sounds lifechanging for a household to me.

That depends if she wants to stop working. Your situation isn't necessarily the same as others. I didn't want my wife to stop working nor did she want to.

 

[Murf]

That mostly relates to taxation, which is pretty much makes sure those earning good salaries will not become wealthy, as taxation on that income will be incredibly high and crippling. And the other side of it is that those who are wealthy are not taxed at anything close to those rates, so they will remain wealthy.

What's the tax rate above £150k per year? 45%? Is that crippling? Is the 32% including NI for lower earners crippling?

I think you're confusing statistics with fairness. I'm not saying it is fair that the very small (statistically) number of individuals that earn the majority of their income through capital gains\dividends etc. have a lower effective tax rate. But just because that is seen as unfair (rightly in my view) doesn't make a 100k salary a low salary. It doesn't make a 45% tax on earnings for the top 2% of earners 'crippling'. It just appears as if this conversation is lacking all perspective. The top 2% of earners are not 'crippled'.

If you want to have a separate debate about how wealth is taxed, and the fairness of the tax system overall have at. But 100k is a high salary.

 

[Murf]

For more context: https://www.theguardian.com/money/2017/may/27/tax-britons-pay-europe-australia-us

From the article, admittedly it's 2017.

A comparison of personal tax rates across Europe, Australia and the US by Guardian Money reveals how average earners in Britain on salaries of £25,000, or “middle-class” individuals on £40,000, enjoy among the lowest personal tax rates of the advanced countries, while high earners on £100,000 see less of their income taken in tax than almost anywhere else in Europe.

Our survey found that someone earning £100,000 in the UK in effect loses about 34.3% of their pay to HM Revenue & Customs once personal allowances, income tax and national insurance are taken into account. The one-third reduction is roughly the same as the US, Australia and Spain, but a long way behind the 38% in Germany, 41% in Ireland, 45% in Sweden and up to 59% in France (though the French figures include very large pension contributions).

 

[krooton]

That depends if she wants to stop working. Your situation isn't necessarily the same as others. I didn't want my wife to stop working nor did she want to.

That's besides the point, she COULD, be it to look after a hypthetical child, or to pursue a passion that isn't a money-maker.

 

[Freefaller]

That's besides the point, she COULD, be it to look after a hypthetical child, or to pursue a passion that isn't a money-maker.

My wife could too. But her income helps. But we do have 2 children and should I be out of work it's good to have someone else to cover us temporarily.

 

[Mrwong]

What's the tax rate above £150k per year? 45%? Is that crippling? Is the 32% including NI for lower earners crippling?

I think you're confusing statistics with fairness. I'm not saying it is fair that the very small (statistically) number of individuals that earn the majority of their income through capital gains\dividends etc. have a lower effective tax rate. But just because that is seen as unfair (rightly in my view) doesn't make a 100k salary a low salary. It doesn't make a 45% tax on earnings for the top 2% of earners 'crippling'. It just appears as if this conversation is lacking all perspective. The top 2% of earners are not 'crippled'.

If you want to have a separate debate about how wealth is taxed, and the fairness of the tax system overall have at. But 100k is a high salary.

Average rent in Manchester £1,100 £13,200 a year average wage £31,285 disposal £18085
" in London £2300 £27,600 a year average wage £39,716 disposal £12116
who keeps more of their income?

 

[throwaway4372]

No, you've changed your life. You didn't just hurl the money out of a window, or blow it on pizzas or whatever.

it looks like we just have different ideas of what life-changing is. which is totally fine, but it means we have two sides arguing for no reason. so I declare peace.

The point is a high salary doesn't not equate To wealth as most people on higher salaries are usually married with children. Looking at it as only a salary is not really offering the right perspective. Household income is far more appropriate.

The single person point of view blows too - you have to pay your mortgage etc all yourself without splitting it with someone.

I feel like this country requires two incomes just to live, so for me having an income that is like two average incomes is a basic requirement for a decent life as a single person. That's one of the reasons I get mad about tax because one big income is taxed more than two little incomes.

I do well for myself, but come from poverty and will inherit next to nothing, so I don't like being compared to someone on the same salary who'll inherit a 500k house for example.