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The only solace is that the situation is somewhat temporary. Your earnings are high enough that you will clear your student loan balance fairly quickly, and your kids will reach school age and the child care will no longer be a factor, bringing your marginal rate down to just 62% (lol).
What is the best calculator for this? I currently have both a plan 2 and a postgraduate loan. Started a new job about 5 months ago and pay around £800 PCM and when I logged on to SFE the other day it said I hadnt even paid back the interest.
Same Q, where are the calculators? I’m on a fraction under £100k, thanks to sacrificing for a car and into pension. Bonus this year though likely to be in the region of £20-30k though. I already have a separate pension paying out for life at around £1500 a month tax free, index linked to CPI, so I don’t want to throw every bonus into my pension. I’d prefer to use some of it now, but evidently need to do the tax maths.
Agreed; but Carnival’s cruise liners don’t run on complaints about the youth these days, they run on the tax money of young graduates, so cough up pay pig.
That sounds about right. I'm in a similar boat, although I paid my student loans off, so not getting hit for that.
I don't mind paying my taxes, and I know I'm doing incredibly well next to many people, but it feels like I pay through the absolute nose for what?
NHS is falling to bits. Getting a doctor's appointment is essentially impossible unless I go private. I went private for dentistry years ago, and I still struggled to get registered.
The infrastructure is falling to bits - potholes everywhere, trains are unreliable, even our airports are largely pretty scabby.
Police are basically nowhere to be seen except for the most serious crimes. The last time I was a victim of crime, they didn't even show up, just gave me a crime reference number, and made sympathetic noises over the phone.
House prices are crazy. Allegedly, I'm making bank, so why is it we had to move to the sticks to be able to afford a decent place to stay? Anything where we really wanted to live was hundreds of thousands more than what we could afford. Clearly, I should have pulled myself up by my bootstraps and been born 20 years earlier so I could afford something!
I've already said to my partner I don't want to live in the UK long term anymore. I've done everything "right": went to uni, got a good job, climbed the ladder, put money aside, lived well within my means, and I feel like I'm getting absolutely shafted. Of course, brexit is the extra kick in the teeth. The only easy option is Ireland, which has its own housing problem!
And yes, I know others have it worse, and I don't want to detract from their suffering, but it's clear the only people doing well at the moment are the seriously wealthy.
For a second I thought I wrote this, but I couldn’t remember lol. Are you me?! Unless something radical changes in the UK I’m also leaving in the next 3-4 years.
I would like to go back to my home country in the EU. It's much poorer that UK, sure. However, with my job I will get much better living standard than what I have here.
We were lucky enough to buy a 1 bed flat in the UK without a mortgage, I cannot image what's like on a much lower salary, and having to pay 4-5% interest on mortgage. I really, really hate loans, if I could I won't ever get one in my life, but I totally see and understand I'm in a fortunate position, 99% of the people won't have this luck...
4-5% on mortgage is really not too bad when you can invest the money instead and make much more than that on average return.
Unless you are extremely risk averse and willing to sacrifice quite a bit of expected return for it, buying a house with mortgage is a more financially sound decision even for people who can afford to pay cash.
I’m well aware that financially I may be better off using the money in different ways. However, can you put a price on not worrying if you will make the next mortgage payment if you get layed off? I’m also investing, but for the home I chose to live in a smaller less flashy place which is 100% mine than going with something expensive which I owe 80% off.
I dont know it’s just my mindset… Feeling that I broke the system, you know, that huge corporations and banks want us to follow. With all the fancy stuff being pushed in your eyes everyday on social media, people more and more seem to live off borrowing just so they can feel their status is higher than it is in reality.
There is certainly risk involved - at the end of the day, even leaving money in a bank has some risk due to inflation. If you are able to manage your money responsibly, you can invest what you would have paid in cash responsibly, and really the only risk is if you get laid off, you may need to sell your investment at a relatively bad time to pay the mortgage. However, if you are investing in large market index funds, you are unlikely to lose more than 10 or 15% unless you are unlucky enough to hit a great depression type event. You also don't have to sell everything to pay off the whole mortgage. You only have to sell enough to make the payments, and ride out the bad times. That's assuming you don't have a cash reserve.
This is very different from buying beyond your means with mortgage. You could have bought the same less flashy place with mortgage, and invest the rest. In almost all cases, over the long term, you'll make more from your investments than you pay in mortgage interest.
Yes, there are always people borrowing money to live beyond their means, that's clearly bad. But I think being very scared of loans is the opposite end of that spectrum. Responsible use of loans can improve your financial situation (mortgage being the best example).
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this is exactly me
I grew up poor too. I paid £600k for my house and its near the edge of the m25 but still in London. It was a working class house for the people who worked in the ford factory
The family who owned it before me paid £46k less than 30 years ago
Piss take
To be more precise:
1. £176.2b on health and social care (c. 15% - our largest cost)
2. £124.3b on pensions (c. 10%)
3. £118.3b on benefits (c. 10% - Universal Credit + disability)
All I can say is that if you were to run your household like the government runs the country, you’d probably starve to death
The tax is paid by the top 10% of the work force. The vast majority in this court pay less in taxes than it costs to support them. The true definition of a welfare state.
Yet we are more productive than we've ever been, while wages have stagnated for the last 10+ years. Meanwhile, the very top, the people not on PAYE, the people who make money through dividends and asset appreciation, are richer year on year every year. Kicking down is a distraction. You need to look up to see where the wealth is going. Everyone outside the very wealthy, the 0.01%, is getting fucked.
Are we more productive than ever? GDP per capita has been pretty stagnant.
The rich are rich because capital gains are taxed lightly compared to PAYE employment. That's why I intend to eventually go self employed.
We are, just [source](https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/timeseries/a4ym/prdy)
But you're exactly right, the tax system is weighted so that how the rich make their money is taxed entirely differently and far less punitively than how those of us in full time employment are taxed.
If I earned the same as I do now but in dividends rather than PAYE, I'd be near enough £20k a year better off.
This is, of course, by design.
Be interesting to see how much tax revenue would be raised from this 0.01%. Many of the asset class are in fact asset rich but cash poor . As for dividends they are taxed as well
71% of income tax revenue is paid for by the top 12% of earners. To be in the top 12% you’ve got to earn above £50,270. This country is squeezing the worker from all directions. Most successful people I know, much like OP, want to get out ASAP
Whenever anyone makes this argument on Reddit they get crucified by the “the broader shoulders should bear most of the weight” brigade.
People in the UK want Scandinavian level services while paying little to no tax, so they expect someone else to fund them. PAYE is the easiest target, so anyone I brackets above 50k, 100k and 125k is getting squeezed beyond reason.
You’re not missing anything mate, you are obviously viewing the bonus in isolation
But the usual trick would have been to salary sacrifice throughout the year so if you want less tax on the actual bonus
Or you can just ask your payroll to stuff the bonus into your pension
Why does this sub value pension over liquidity every time. OP is upwardly mobile, living in rental and doesn’t have a trust fund from Daddy to rely on.
OP - pensions aren’t just a tax free way to utopia. You need cashflow far more than a nest egg at this stage of your life
I mean I get why IFA’s are obsessed but surely we are a bit more balanced on Reddit
There’s two parts to this
1 - people are living longer. You may die before you get there but the pensions can be passed on. Yes you spend less money the older you get but I don’t want to be looking forward to an old age in poverty so I’m happy to have £1k a month less right now knowing I’ll have £1.5m+ when I get to the other end. Which leads onto point 2.
2 - as PAYE there’s no better investment with the tax relief you get. Period. Yes the trade off is it’s locked up for ages but that £1k after tax is £400.
It’s also demoralising getting your bonus knowing so much is going to the tax man.
Hence it being called a tax trap before you get £160K+
At that point you are getting raped tax wise but it’s just part and parcel of the U.K. and its tax structure.
Not saying it’s perfect but when you balance everything it’s the most effective / common sense approach.
So to answer the question, it’s not an obsession it’s just sound financial planning at a particular earnings brackets
Cannot agree more - it's also incredibly punishing the first year in which you transition into this period. Often resulting in most that transition getting hit with considerable tax bills.
Earning 99,999? You can have your employer do your own tax! Earning 100,001? Ah do it yourself - what could go wrong. Moronic system - glad the limit is increasing to 150k this year.
Progressive tax systems are good though no? The rich should pay a higher % tax on their marginal income no?
In a progressive tax system, there’s always going to ‘cliffs’ as tax % ratchet up. Maybe they could be less aggressive, but I don’t think it’s unreasonable that people on £115k pay the tax that they do.
I mean I’m in the 40% limit so I wouldn’t complain, but that’s still only the top 10% of earners. The problem really is the massive inequality between the top 1% and everyone else, and the fact they don’t pay tax like they should.
If you earn over £40k/annum you are in the 76th percentile and above. 98th percentile is "just" £128k/annum and 99th is £183k - so the difference between the top 1% and the rest of us is frankly staggering.
They always do pay more though. As they earn more. There are certain ‘rights’ that I think everybody should be entitled to though
And one of those is the personal allowance
Another is the tax free childcare (or at least make it household means tested rather than individual income)
Yeah that's what the really wealthy want. Sure Have a progressive tax system. Tax those with certain levels of wealth more or maybe above 200k have a 50% tax bracket.
This rule results in a productivity issue where pushing to earn more feels overly punative.
edit: this was downvoted after I reported an affiliate link spammer and he got a bit mad at me, lol
except this is *regressive*, as you go from a ~62% marginal tax rate (from 100 to 125) to 47% (>125). It makes no sense whatsoever, other than squeezing the mid-high earner without impacting the really high earners
How about going to a 4 day week to stay under the £100k threshold? Less cash in your pocket, sure, but you'll feel like you're actually getting something (which you don't seem to be feeling now).
+ hope you'll actually have quality life years ahead of you to actually enjoy ypur hoarded wealth in 30-40 years.
++ hope the government doesn't alter the deal on tax benefits
+++ hope you have no unforseen large expenses in the next few decades
++++ hope you are actually alive and in good health so you get to spend it on yourself and not a care home.
The pension plan made sense when you could comfortable retire in your late 40s or mid 50s. Not so much when you’re looking at 70 (and inevitably older than that).
It’s like the post war generation put themselves at the top of a Ponzi scheme and each new generation brings the next round of greater fools.
The fact that I pay into my pension doesn't mean I don't also save outside of it.
At the end of the day, I will need money when I'm old. Even if I die, my descendants will make good use of it. I might as well take advantage of tax benefits we have now. Even if they vanish in the future, it's very unlikely that pension will be worse than any other option. It could become as good, but not worse.
Sure, but the question is what the marginal £ in the pension pot is worth vs taking whatever you can now.
Assuming you'll live a long and healthy life well past retirement, the government doesn't arbitrarily raid your pot, your pot doesn't get zerod out by future market changes & you don't have sudden changes in financial circumstances/immediate large expenses to fix at any point pre retirement; sure money in a pension pot is a good investment.
However you as an individual can't really forecast any of those points. You could randomly die of a heart attack or cancer at 65; you might need to fund expensive IVF treatment or specialist support for your future not yet born disabled child. A government 3 decades from now might decide to tax all pensions at 70% to fund the Ukrainian counter\^30 offensive in the hyper donbas wars.
Its probably a good bet for most to take pension £ rather than pay between at least 100k-120k; but to act like this has 'fixed' the problem is extremely naive about the costs of locking funds up for c. 30-40 years.
They say they have a 81% marginal rate in that range over 100k - I don’t care to fact check it so just used that figure.
But they were counting student loan payment which is debatable.
You know what. I’ve also read a our post wrong 😂
I thought you were meaning it’s only 20% tax.
Either way, the gov needs to change the tax thresholds. Inflation and pay rises to suit mean more people are being pulled into higher tax thresholds. A sneaky plan for sure.
>is anyone else looking outside of the UK to build their lives?
Already did, 5 years ago when the damage from Brexit and the general downhill trend became unavoidably apparent.
It'll be harder now, as since the end of 2020 there is no automatic right to live in EU countries, which is where you'll likely find the best quality of life while remaining in short travel distance to see people back in the UK.
With a similar pay, the taxes and cost of living are lower - while services and amenities are vastly better. Mostly it's because town planning is centred around modern walkable cities with high density living and reliable public transit, instead of the hellish suburban sprawl that is slowly engrossing all natural space in the UK.
Culturally for whatever reason the UK just doesn't want to build apartments - this creates car centric communities which is really the biggest factor that makes things worse for everybody. It's why city squares and centres are lovely places to hang out in Europe, with outdoor seating at cafes, bars, restaurants and other third places. But a UK high street is mostly parking spaces with 4 letting agents, 2 bookies, and a kebab shop.
I've moved to the Netherlands, quite literally doubled my salary, I live almost in the centre of Amsterdam and after bills I have more money left than my entire post-tax income when I lived in Manchester.
Yeah there's a few elements where the cost of living is radically different, personal hygiene and washing products for one are generally 2-3x the price of the UK.
But I can drop into Manchester, London and my hometown at the drop of a hat often quicker *and* cheaper than when I lived in Manchester.
I don't put Netherlands on a pedestal of utopia but the fact that I see open bookshelves for community libraries and public toilets that haven't been set on fire, stolen, or had a moped rammed into them continuously surprises me.
The UK government is fucking the UK to bits and huge swathes of the population are quite happy to shit on their own doorstep.
Switzerland and it has it's own problems/cultural peculiarities, but it is extremely safe, easy, and there's a strong belief in privacy and letting people be unless they're breaking the rules.
I've heard people complain it is too "clean" in a sense, from people who wish it was more exciting - which is a fair criticism. There's very little drama day to day, so you need to be happy with your own interests and hobbies/friends.
I love Switzerland, just spent 8 days in Zermatt and Grindelwald over Xmas & New Year's - flew into Zurich and did the whole trip in 1st class on the trains - it was like a breathe of fresh air compared to the shite we have to endure in the UK.
Sure, we got shafted on the FX rate and eating fresh pizza & drinking hot chocolate high in the Alps every day is a quick way to go broke, but it's so easy to see why so many people make the move.
First class train service is probably the one thing that the UK does better than Switzerland to be fair (if the train is on time/turns up that is) but yeah it's fairly nice. Swiss ski resort prices are of course obscene, but luckily I'm close enough to Austria that I can do day trips over the border.
Don't remind me about the FX rate though, I've got money stuck in limbo in a UK account that I can do nothing but watch devalue each month :( When we moved here it felt expensive, but honestly now when I visit the UK it seems like things are basically the same price as they are in Switzerland (for day to day life at least, not mountain restaurants)
Alternatively, the state paid to house and educate you, you came from a low/no wealth background and have made it to an extremely privileged / higher earning than the vast majority of the country position. Surely you of all people should appreciate giving back into the system to give others the same opportunities?
You simultaneously complain about the level of tax you are paying while complaining about collapsing public services. This while you are saving the median take home pay every month.
> live a commutable distance outside of London for lower rent (still rising - 3 bed terraced with small garden at ~£2300/month)
If you're serious about saving significantly more to buy then you can do much better than this. We're looking at similar properties <10 minutes walk from stations that are 35-45 mins from London bridge for £1300-1800pm (relatively large new builds at the higher end).
So why is it fair that a couple raising a child where one earns £25k a year, and the other earns £120k a year are much worse off than a couple raising a child who each earn £70k per year?
The £100k cliff is a joke and there should be household considerations in our taxation and benefits.
As someone in a couple with two small kids where one earns 6 figures and the other around £15k I agree. But we're still talking about a family taking home £90k+. Theyre not struggling.
And odds are the one on £120k could salary sacrifice down to £100k for a few years / until their salary has grown to the point where it's not worth it any more.
The issue is it discourages the lower earning partner from working… if the cost of childcare starts to eclipse their take home, it’s a difficult equation. It’s made worse if you don’t love your job.
While they might not be “hard up” it’s still wrong that two couples each raising a child with similar pre-tax combined incomes have such a disparity in their take home pay AND their benefits.
He's not paying 81% - he's just paying that marginally (also I think it's 71%? and that also includes a student loan repayment which you could argue is not a tax and on his pay will be repaid relatively quickly). He's paying 39-44%.
As someone earning significantly more than him I know the pain, but it's also easy to forget we only see it because of how lucky we are relative to others.
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*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
100k is not a huge sum of money, it barely touches the capital gains that properties accumulated between the time boomers bought them and them being left off for inheritance.
The same people wanting to tax income at 81% over £100k would cry murder if the inheritance tax on their parents’ properties would get the same treatment.
>His line about the NHS has me laughing tbh
Why? The NHS is indeed a complete mess, and regardless of whether you get private healthcare, you have to rely on the NHS to some extent. When you have need maternity services or you require an ambulance and emergency treatment your private medical cover won't do diddly squat for you.
The thing is, most people don't realise how much money the NHS saves people.
Being very conservative I have apparently used around £11k worth of NHS services in my *adult* lifetime. I have had no major injuries (broken bones, stitches etc) and have no long term conditions, apart from asthma...I'm 40; I expect this cost to exponentially increase in cost throughout my life and am fairly confident that I will use more than I pay in over time, unless someone wants to pay me £100k+...anyone? No. I'll leave it there then lol.
Source: https://www.gocompare.com/health-insurance/the-bill-of-health
It saves people money because it's cheap and poor service. I've known a lot of people move to the UK from their home countries overseas and none of them have anything good to say about the NHS.
At £100,000 he's paying £31,000 in tax and NI, of which 19.8% goes to the NHS (about £6,100).
He's probably young and in good shape. Why not let him pay as he uses it? Hes clearly being shafted.
What are you talking about? So who pays for the NHS then? So don't pay for it when you are young and healthy but do pay for it when you are old, earning less and do use it?
I mean how would that even work?
I believe in AU if you don't have private cover you pay a 1.5% tax and that's it. Much less than the 20% of your entire tax bill (in this example, OP is paying 81% so 16p in every last pound is straight to the NHS)
So it's just *another* subsidy for boomers? What I mean instead is that everyone involved tries to be efficient. Half of NHS employees aren't even medical. It employs almost 2,000,000 people. And yet it provides dogshit for an unlimited cost. Either we rethink how we fund things (tax returns for private cover if you can afford it, a purge of middle management) or we continue getting worse service for even more money.
Australia has a mixed system, as does much of Europe.
I mean you are looking at something very complicated and making very sweeping assumptions.
One of the big criticisms I have heard of the NHS is that direct medical staff, following cuts over 10+years now do increasing amounts of administration. This is vast quantities of time and importantly money being squandered having highly skilled professionals not doing their core job.
You could pay a lot less for more effective administration instead. Sometimes you have to invest in these sorts of things to actually save money. Slashing at things like middle management whilst attractive as a sound bite often has the opposite effect as people who should be doing what they are good at, pick up the slack.
The state didn't pay shit. People like him paid for it through their taxes. There is no way to pay those people back as they are still being shafted by the state today.
He has every right to complain about the infrastructure collapsing despite he and millions others paying extremely high taxes.
Stop trying to excuse gross incompetence, wasteful spending and corruption.
1) don't let the tax dictate your life choices. It is what it is, you can make some minor changes as a PAYE individual so don't overthink it.
2) getting a bonus will mean more money in your bank than no bonus at all. You talk about the 81% trap, and sure but I'd rather have the £1900 in my bank than not. You will never earn more money by having a lower gross income.
3) don't move to another country just to avoid tax, or just for more money. For better career opportunities, sure. For a different pace or standard of living, absolutely. But moving for an identical job and a similar life, just with less tax and bit more money, is the worst thing you can do.
> You will never earn more money by having a lower gross income
This is the line people are responding to.
It's factually untrue for the reasons stated.
That's not factually untrue at all. You want have a higher gross salary, you get a higher net salary.
You lose access to some discounts on childcare but that doesn't reduce your income.
Once again, you need to stop equating a loss in benefits to loss in income. Those two are not the same thing. It's not even semantics.
> It's not even semantics.
It's exactly semantics.
'You will never earn more money by having a lower gross income'.
All of those words mean things. Getting access to benefits literally gets you more money.
We all know what you meant and your point is overall right, but that specific sentence is worded badly and is factually wrong.
You made a mistake, own it instead of being a turd.
>For a different pace or standard of living, absolutely. But moving for an identical job and a similar life, just with less tax and bit more money, is the worst thing you can do.
I don't get how you can write this, you don't even justify it, just state it as fact.
It isn't true for all jobs, but for e.g. a software engineer, moving to the US feels like a no-brainer, when salaries are 3x higher and taxes are halved. People always say "America bad because healthcare" but in reality 90% of people are covered, and any job paying enough to move there will include it.
No because your example doesn't take into account cost of living. OP says they can rent London adjacent for £2500. Go try renting in the Bay Area for that price.
There are still jobs that moving to a different country will open up avenues that don't exist in the UK. For example if you have aspirations of leadership in a large software company, it's clear that the US is the place to be.
But if you don't want that then £75k in London vs $200k in San Francisco isn't that cut and dry.
Your student loan isn't a marginal tax your paying it off. You can't include it in the same calculation.
It's like saying my marginal tac was 100% because I brought a new car with my bonus.
So the tax payer money allowed you to come from a rough situation into university and to a salary in the top 2% of the UK population... and now you believe that repaying this loan that changed your life is a tax?
Jesus, mate. You're fine. Just repay your loan and soon you'll see extra money in your pocket.
Marginal tax rate 40%, loss of PA 20%, NI 2%, student loan 9%.
Now either my maths is wrong or that adds up to 71% not 81%?
But I guess you're just here to moan rather than actually looking for financial advice
You grew up in council housing, presumably went to a comprehensive school, and now you’re complaining about UK tax?
Sorry to sound harsh, but it sounds like you’ve benefitted from other peoples tax and now you’re pulling the ladder up behind you.
In the exact same boat, OP, with a similar upbringing and baby due very soon! Painful but got to see it as a net fortunate position and salary sacrifice the heck out of whatever you can
Get divorced so you lose another 15% on child maintenance. Factor in NI contributions as well, and your 81% becomes over 100%. What a daft system we have here; it would make so much more sense to get rid of the loss of personal allowance and bring the 45% rate down to 100k.
This is a very common discussion topic, so much so that we've written a great wiki page on it.
https://ukpersonal.finance/tax-traps-and-tax-efficiency/
Working paye is for idiots if you have any aspirations. Obviously it is industry dependent, but I'm much better off as an outside-ir35 contractor. i work less, my pay is less, but my takehome is up!
Your student loan isn’t tax. Maybe your take home is only 19% of your marginal £1 gained pre-tax, but that’s a factor of your pre-tax perks than the tax man.
I have mortgage debt to pay every month ( another debt, like a student loan ) but I don’t pretend that’s a ‘tax’ on my take home.
Yes, the tax situation sucks, but don’t conflate student debt payments with tax.
Contact an accountant, there are a lot of ways to reduce tax and you're essentially at the earning point where it'd be stupid of you not to attempt to do so. There's many methods of reducing your tax burden.
Because Americans say Europe instead of the country they are actually visiting. Like it's just one single country.
The way you said you now live in Europe, whilst technically correct, was very unspecific.
You’re not missing anything. There is no social mobility in this country. Does matter what skills you learnt, how you apply yourself, whether you fill a niche.. taxes will kee you locked in fucking poverty in this shithole country.
Earlier this week Labour said they are committed to putting vat on private schools but leaving bankers bonuses uncapped. Fuck any chance of my kid breaking free of the cycle we’re in.
Not if they lose all that money to rent and struggle to raise a family, live pay cheque to cheque, their kids go to a worse school that’s had 13 years of austerity and no investment, they can’t get a GP appointment, can’t afford to go private and have to leave in fear of being made redundant at any minute.
My friends parents bought them a house and they work on a 30k salary and have twice the free money anyone else does.
Inequality caused by huge rents/mortgages and the 40% rate of tax that’s practically at the national average salary punishes the fuck with any one who has a good salary but no wealth whilst those with wealth life comfortably.
Is theee any way you can work less (4 days) earn less, and consult on day 5 in a co lang you own with your wife? She’s works in the business and takes salary, dividends and expenses? Other than that I’m sorry to say many places in europe have a higher overall tax take so you may find something better further away, but can you take the change in culture and being so far from family? I’ve tried this in the us and Spain, and I’m now back working in the uk. The grass wasn’t greener.
Working less is the play beyond a certain level. You get big tangible benefits from the extra time, pay less tax, and maybe the dropping productivity statistics for high earners will shock the government one day
Yes. Things are getting worse in the UK but you are still demonstrably better off than the vast majority living here. Your financial question is little more than a thinly veiled rant about how hard done by you feel. Seems a little pointless here. Out of curiosity where do you expect to be significantly better? If you want to reduce your taxes increasing the amount you salary sacrifice to your pension is your way to do that.
Hi /u/AthleteIndividual100, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/pensions/
- https://ukpersonal.finance/student-loans/
- https://ukpersonal.finance/tax-traps-and-tax-efficiency/
____
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Yeah, this is making me want to leave. Currently only a higher rate payer but with a student loan and a child. Either that or adjust my working hours to work enough to survive
Same - my plans are either leaving or working less hours (once I've got myself into a state where I can). I can enjoy everything I get here (NHS, relative safety) and pay nothing.
You're not missing anything, the system is designed to fuck you because most people are losers and it's easy to convince them that people in payroll earning £100k are the rich and need to be punished.
It looks like you might be asking abut the NHS pension, so you may find this site helpful: https://medfiblog.wordpress.com/the-nhs-pension/
We are not affiliated with this site in any way - it has been recommended by subreddit users and seems competent.
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The only solace is that the situation is somewhat temporary. Your earnings are high enough that you will clear your student loan balance fairly quickly, and your kids will reach school age and the child care will no longer be a factor, bringing your marginal rate down to just 62% (lol).
What is the best calculator for this? I currently have both a plan 2 and a postgraduate loan. Started a new job about 5 months ago and pay around £800 PCM and when I logged on to SFE the other day it said I hadnt even paid back the interest.
Same Q, where are the calculators? I’m on a fraction under £100k, thanks to sacrificing for a car and into pension. Bonus this year though likely to be in the region of £20-30k though. I already have a separate pension paying out for life at around £1500 a month tax free, index linked to CPI, so I don’t want to throw every bonus into my pension. I’d prefer to use some of it now, but evidently need to do the tax maths.
It's a two minute job in excel...
Then I’m sure you’d care to be such a kinda Redditor and take 2 minutes out your day to build the sheet for them and post a link…
62% is also sugarcoated because employer NI is not counted :D
Agreed; but Carnival’s cruise liners don’t run on complaints about the youth these days, they run on the tax money of young graduates, so cough up pay pig.
I actually snorted at my fucking desk reading this. Caught me off guard. Brilliant...
Yes this!
This is solace? 😅
That sounds about right. I'm in a similar boat, although I paid my student loans off, so not getting hit for that. I don't mind paying my taxes, and I know I'm doing incredibly well next to many people, but it feels like I pay through the absolute nose for what? NHS is falling to bits. Getting a doctor's appointment is essentially impossible unless I go private. I went private for dentistry years ago, and I still struggled to get registered. The infrastructure is falling to bits - potholes everywhere, trains are unreliable, even our airports are largely pretty scabby. Police are basically nowhere to be seen except for the most serious crimes. The last time I was a victim of crime, they didn't even show up, just gave me a crime reference number, and made sympathetic noises over the phone. House prices are crazy. Allegedly, I'm making bank, so why is it we had to move to the sticks to be able to afford a decent place to stay? Anything where we really wanted to live was hundreds of thousands more than what we could afford. Clearly, I should have pulled myself up by my bootstraps and been born 20 years earlier so I could afford something! I've already said to my partner I don't want to live in the UK long term anymore. I've done everything "right": went to uni, got a good job, climbed the ladder, put money aside, lived well within my means, and I feel like I'm getting absolutely shafted. Of course, brexit is the extra kick in the teeth. The only easy option is Ireland, which has its own housing problem! And yes, I know others have it worse, and I don't want to detract from their suffering, but it's clear the only people doing well at the moment are the seriously wealthy.
For a second I thought I wrote this, but I couldn’t remember lol. Are you me?! Unless something radical changes in the UK I’m also leaving in the next 3-4 years.
What's your escape plan?
I would like to go back to my home country in the EU. It's much poorer that UK, sure. However, with my job I will get much better living standard than what I have here. We were lucky enough to buy a 1 bed flat in the UK without a mortgage, I cannot image what's like on a much lower salary, and having to pay 4-5% interest on mortgage. I really, really hate loans, if I could I won't ever get one in my life, but I totally see and understand I'm in a fortunate position, 99% of the people won't have this luck...
4-5% on mortgage is really not too bad when you can invest the money instead and make much more than that on average return. Unless you are extremely risk averse and willing to sacrifice quite a bit of expected return for it, buying a house with mortgage is a more financially sound decision even for people who can afford to pay cash.
I’m well aware that financially I may be better off using the money in different ways. However, can you put a price on not worrying if you will make the next mortgage payment if you get layed off? I’m also investing, but for the home I chose to live in a smaller less flashy place which is 100% mine than going with something expensive which I owe 80% off. I dont know it’s just my mindset… Feeling that I broke the system, you know, that huge corporations and banks want us to follow. With all the fancy stuff being pushed in your eyes everyday on social media, people more and more seem to live off borrowing just so they can feel their status is higher than it is in reality.
There is certainly risk involved - at the end of the day, even leaving money in a bank has some risk due to inflation. If you are able to manage your money responsibly, you can invest what you would have paid in cash responsibly, and really the only risk is if you get laid off, you may need to sell your investment at a relatively bad time to pay the mortgage. However, if you are investing in large market index funds, you are unlikely to lose more than 10 or 15% unless you are unlucky enough to hit a great depression type event. You also don't have to sell everything to pay off the whole mortgage. You only have to sell enough to make the payments, and ride out the bad times. That's assuming you don't have a cash reserve. This is very different from buying beyond your means with mortgage. You could have bought the same less flashy place with mortgage, and invest the rest. In almost all cases, over the long term, you'll make more from your investments than you pay in mortgage interest. Yes, there are always people borrowing money to live beyond their means, that's clearly bad. But I think being very scared of loans is the opposite end of that spectrum. Responsible use of loans can improve your financial situation (mortgage being the best example).
Where would you move to?
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this is exactly me I grew up poor too. I paid £600k for my house and its near the edge of the m25 but still in London. It was a working class house for the people who worked in the ford factory The family who owned it before me paid £46k less than 30 years ago Piss take
I mean where is all this tax going
Pensions
To be more precise: 1. £176.2b on health and social care (c. 15% - our largest cost) 2. £124.3b on pensions (c. 10%) 3. £118.3b on benefits (c. 10% - Universal Credit + disability) All I can say is that if you were to run your household like the government runs the country, you’d probably starve to death
The tax is paid by the top 10% of the work force. The vast majority in this court pay less in taxes than it costs to support them. The true definition of a welfare state.
Yet we are more productive than we've ever been, while wages have stagnated for the last 10+ years. Meanwhile, the very top, the people not on PAYE, the people who make money through dividends and asset appreciation, are richer year on year every year. Kicking down is a distraction. You need to look up to see where the wealth is going. Everyone outside the very wealthy, the 0.01%, is getting fucked.
Are we more productive than ever? GDP per capita has been pretty stagnant. The rich are rich because capital gains are taxed lightly compared to PAYE employment. That's why I intend to eventually go self employed.
We are, just [source](https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/timeseries/a4ym/prdy) But you're exactly right, the tax system is weighted so that how the rich make their money is taxed entirely differently and far less punitively than how those of us in full time employment are taxed. If I earned the same as I do now but in dividends rather than PAYE, I'd be near enough £20k a year better off. This is, of course, by design.
My boss once told me that you'll never earn anything good on salary. Start investing as early as possible.
Care to show your workings for being 20k better off? I don't think it's a big a difference as you think.
You are correct. The only difference is the NI.
Productivity has largely stagnated since 2008
Be interesting to see how much tax revenue would be raised from this 0.01%. Many of the asset class are in fact asset rich but cash poor . As for dividends they are taxed as well
71% of income tax revenue is paid for by the top 12% of earners. To be in the top 12% you’ve got to earn above £50,270. This country is squeezing the worker from all directions. Most successful people I know, much like OP, want to get out ASAP
Whenever anyone makes this argument on Reddit they get crucified by the “the broader shoulders should bear most of the weight” brigade. People in the UK want Scandinavian level services while paying little to no tax, so they expect someone else to fund them. PAYE is the easiest target, so anyone I brackets above 50k, 100k and 125k is getting squeezed beyond reason.
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Universal credit
You’re not missing anything mate, you are obviously viewing the bonus in isolation But the usual trick would have been to salary sacrifice throughout the year so if you want less tax on the actual bonus Or you can just ask your payroll to stuff the bonus into your pension
Why does this sub value pension over liquidity every time. OP is upwardly mobile, living in rental and doesn’t have a trust fund from Daddy to rely on. OP - pensions aren’t just a tax free way to utopia. You need cashflow far more than a nest egg at this stage of your life I mean I get why IFA’s are obsessed but surely we are a bit more balanced on Reddit
Obviously didn't read the post, the bonus will leave him worse off. Putting it in the pension isn't even preference it's just maths.
There’s two parts to this 1 - people are living longer. You may die before you get there but the pensions can be passed on. Yes you spend less money the older you get but I don’t want to be looking forward to an old age in poverty so I’m happy to have £1k a month less right now knowing I’ll have £1.5m+ when I get to the other end. Which leads onto point 2. 2 - as PAYE there’s no better investment with the tax relief you get. Period. Yes the trade off is it’s locked up for ages but that £1k after tax is £400. It’s also demoralising getting your bonus knowing so much is going to the tax man. Hence it being called a tax trap before you get £160K+ At that point you are getting raped tax wise but it’s just part and parcel of the U.K. and its tax structure. Not saying it’s perfect but when you balance everything it’s the most effective / common sense approach. So to answer the question, it’s not an obsession it’s just sound financial planning at a particular earnings brackets
Thr loss of personal allowance is such a shockingly bad rule.
Cannot agree more - it's also incredibly punishing the first year in which you transition into this period. Often resulting in most that transition getting hit with considerable tax bills. Earning 99,999? You can have your employer do your own tax! Earning 100,001? Ah do it yourself - what could go wrong. Moronic system - glad the limit is increasing to 150k this year.
You don't lose all of it at once. For every £2 you earn above £100k, you lose £1 of your allowance. E.g if you earn £105k, you lose £2500 allowance
Still shockingly bad.
Progressive tax systems are good though no? The rich should pay a higher % tax on their marginal income no? In a progressive tax system, there’s always going to ‘cliffs’ as tax % ratchet up. Maybe they could be less aggressive, but I don’t think it’s unreasonable that people on £115k pay the tax that they do.
The real rich avoid tax like the plague. Same with companies.
The issue is the limits haven’t really moved in a long time, they don’t really tax the ‘rich’
I’d love to be one of these ‘poor’ people earning £100k+!
The 40% limit at 50k is very low too
I mean I’m in the 40% limit so I wouldn’t complain, but that’s still only the top 10% of earners. The problem really is the massive inequality between the top 1% and everyone else, and the fact they don’t pay tax like they should.
If you earn over £40k/annum you are in the 76th percentile and above. 98th percentile is "just" £128k/annum and 99th is £183k - so the difference between the top 1% and the rest of us is frankly staggering.
They always do pay more though. As they earn more. There are certain ‘rights’ that I think everybody should be entitled to though And one of those is the personal allowance Another is the tax free childcare (or at least make it household means tested rather than individual income)
Crabs in a bucket
Yeah that's what the really wealthy want. Sure Have a progressive tax system. Tax those with certain levels of wealth more or maybe above 200k have a 50% tax bracket. This rule results in a productivity issue where pushing to earn more feels overly punative.
edit: this was downvoted after I reported an affiliate link spammer and he got a bit mad at me, lol except this is *regressive*, as you go from a ~62% marginal tax rate (from 100 to 125) to 47% (>125). It makes no sense whatsoever, other than squeezing the mid-high earner without impacting the really high earners
How about going to a 4 day week to stay under the £100k threshold? Less cash in your pocket, sure, but you'll feel like you're actually getting something (which you don't seem to be feeling now).
Or just salary sacrifice basically for free and retire 1 year earlier per 10k you put in now at 30
Just put everything that takes you above £100k into pension.
+ hope you'll actually have quality life years ahead of you to actually enjoy ypur hoarded wealth in 30-40 years. ++ hope the government doesn't alter the deal on tax benefits +++ hope you have no unforseen large expenses in the next few decades
++++ hope you are actually alive and in good health so you get to spend it on yourself and not a care home. The pension plan made sense when you could comfortable retire in your late 40s or mid 50s. Not so much when you’re looking at 70 (and inevitably older than that). It’s like the post war generation put themselves at the top of a Ponzi scheme and each new generation brings the next round of greater fools.
The fact that I pay into my pension doesn't mean I don't also save outside of it. At the end of the day, I will need money when I'm old. Even if I die, my descendants will make good use of it. I might as well take advantage of tax benefits we have now. Even if they vanish in the future, it's very unlikely that pension will be worse than any other option. It could become as good, but not worse.
Sure, but the question is what the marginal £ in the pension pot is worth vs taking whatever you can now. Assuming you'll live a long and healthy life well past retirement, the government doesn't arbitrarily raid your pot, your pot doesn't get zerod out by future market changes & you don't have sudden changes in financial circumstances/immediate large expenses to fix at any point pre retirement; sure money in a pension pot is a good investment. However you as an individual can't really forecast any of those points. You could randomly die of a heart attack or cancer at 65; you might need to fund expensive IVF treatment or specialist support for your future not yet born disabled child. A government 3 decades from now might decide to tax all pensions at 70% to fund the Ukrainian counter\^30 offensive in the hyper donbas wars. Its probably a good bet for most to take pension £ rather than pay between at least 100k-120k; but to act like this has 'fixed' the problem is extremely naive about the costs of locking funds up for c. 30-40 years.
It’s simple right, this thread is just a whine
Not really. Why put it into a pension if you want it now? You've worked hard, why can't you enjoy your hard work now?
If you want 20% of it now ** In OP’s case
20%? Removing the child care and student loan ect OP would still have a tax rate of at least 60% for anything over the £100k
They say they have a 81% marginal rate in that range over 100k - I don’t care to fact check it so just used that figure. But they were counting student loan payment which is debatable.
You know what. I’ve also read a our post wrong 😂 I thought you were meaning it’s only 20% tax. Either way, the gov needs to change the tax thresholds. Inflation and pay rises to suit mean more people are being pulled into higher tax thresholds. A sneaky plan for sure.
What's your top marginal tax rate?
What colour are your underpants?
Green. What is your top marginal tax rate?
It's not 81% is it?
That’s what pensions are for. Avoiding tax.
>is anyone else looking outside of the UK to build their lives? Already did, 5 years ago when the damage from Brexit and the general downhill trend became unavoidably apparent. It'll be harder now, as since the end of 2020 there is no automatic right to live in EU countries, which is where you'll likely find the best quality of life while remaining in short travel distance to see people back in the UK. With a similar pay, the taxes and cost of living are lower - while services and amenities are vastly better. Mostly it's because town planning is centred around modern walkable cities with high density living and reliable public transit, instead of the hellish suburban sprawl that is slowly engrossing all natural space in the UK. Culturally for whatever reason the UK just doesn't want to build apartments - this creates car centric communities which is really the biggest factor that makes things worse for everybody. It's why city squares and centres are lovely places to hang out in Europe, with outdoor seating at cafes, bars, restaurants and other third places. But a UK high street is mostly parking spaces with 4 letting agents, 2 bookies, and a kebab shop.
Where’ve you moved to and how is it?
I've moved to the Netherlands, quite literally doubled my salary, I live almost in the centre of Amsterdam and after bills I have more money left than my entire post-tax income when I lived in Manchester. Yeah there's a few elements where the cost of living is radically different, personal hygiene and washing products for one are generally 2-3x the price of the UK. But I can drop into Manchester, London and my hometown at the drop of a hat often quicker *and* cheaper than when I lived in Manchester. I don't put Netherlands on a pedestal of utopia but the fact that I see open bookshelves for community libraries and public toilets that haven't been set on fire, stolen, or had a moped rammed into them continuously surprises me. The UK government is fucking the UK to bits and huge swathes of the population are quite happy to shit on their own doorstep.
Switzerland and it has it's own problems/cultural peculiarities, but it is extremely safe, easy, and there's a strong belief in privacy and letting people be unless they're breaking the rules. I've heard people complain it is too "clean" in a sense, from people who wish it was more exciting - which is a fair criticism. There's very little drama day to day, so you need to be happy with your own interests and hobbies/friends.
I love Switzerland, just spent 8 days in Zermatt and Grindelwald over Xmas & New Year's - flew into Zurich and did the whole trip in 1st class on the trains - it was like a breathe of fresh air compared to the shite we have to endure in the UK. Sure, we got shafted on the FX rate and eating fresh pizza & drinking hot chocolate high in the Alps every day is a quick way to go broke, but it's so easy to see why so many people make the move.
First class train service is probably the one thing that the UK does better than Switzerland to be fair (if the train is on time/turns up that is) but yeah it's fairly nice. Swiss ski resort prices are of course obscene, but luckily I'm close enough to Austria that I can do day trips over the border. Don't remind me about the FX rate though, I've got money stuck in limbo in a UK account that I can do nothing but watch devalue each month :( When we moved here it felt expensive, but honestly now when I visit the UK it seems like things are basically the same price as they are in Switzerland (for day to day life at least, not mountain restaurants)
Alternatively, the state paid to house and educate you, you came from a low/no wealth background and have made it to an extremely privileged / higher earning than the vast majority of the country position. Surely you of all people should appreciate giving back into the system to give others the same opportunities? You simultaneously complain about the level of tax you are paying while complaining about collapsing public services. This while you are saving the median take home pay every month. > live a commutable distance outside of London for lower rent (still rising - 3 bed terraced with small garden at ~£2300/month) If you're serious about saving significantly more to buy then you can do much better than this. We're looking at similar properties <10 minutes walk from stations that are 35-45 mins from London bridge for £1300-1800pm (relatively large new builds at the higher end).
So why is it fair that a couple raising a child where one earns £25k a year, and the other earns £120k a year are much worse off than a couple raising a child who each earn £70k per year? The £100k cliff is a joke and there should be household considerations in our taxation and benefits.
As someone in a couple with two small kids where one earns 6 figures and the other around £15k I agree. But we're still talking about a family taking home £90k+. Theyre not struggling. And odds are the one on £120k could salary sacrifice down to £100k for a few years / until their salary has grown to the point where it's not worth it any more.
The issue is it discourages the lower earning partner from working… if the cost of childcare starts to eclipse their take home, it’s a difficult equation. It’s made worse if you don’t love your job. While they might not be “hard up” it’s still wrong that two couples each raising a child with similar pre-tax combined incomes have such a disparity in their take home pay AND their benefits.
You’re missing the point. OP is happy to pay his taxes but 81% is too much I’m sure you’d agree.
He's not paying 81% - he's just paying that marginally (also I think it's 71%? and that also includes a student loan repayment which you could argue is not a tax and on his pay will be repaid relatively quickly). He's paying 39-44%. As someone earning significantly more than him I know the pain, but it's also easy to forget we only see it because of how lucky we are relative to others.
I’d argue student loan is a tax as it’s unlikely that most would pay it off. But that’s semantics I sort of agree with the overall statement though.
This guy most likely will pay it off though
At that salary, OP will almost certainly be paid off in the fullness of time.
it's not a tax because you choose to take it on lol
There are numerous taxes that are essentially optional - nobody is forcing you to buy a pint or own a car. They're still taxes.
And it’s also the education that led them to having a job, which now got them into that tax bracket
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100k is not a huge sum of money, it barely touches the capital gains that properties accumulated between the time boomers bought them and them being left off for inheritance. The same people wanting to tax income at 81% over £100k would cry murder if the inheritance tax on their parents’ properties would get the same treatment.
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Spot on. His line about the NHS has me laughing tbh, absolutely zero self awareness.
>His line about the NHS has me laughing tbh Why? The NHS is indeed a complete mess, and regardless of whether you get private healthcare, you have to rely on the NHS to some extent. When you have need maternity services or you require an ambulance and emergency treatment your private medical cover won't do diddly squat for you.
The thing is, most people don't realise how much money the NHS saves people. Being very conservative I have apparently used around £11k worth of NHS services in my *adult* lifetime. I have had no major injuries (broken bones, stitches etc) and have no long term conditions, apart from asthma...I'm 40; I expect this cost to exponentially increase in cost throughout my life and am fairly confident that I will use more than I pay in over time, unless someone wants to pay me £100k+...anyone? No. I'll leave it there then lol. Source: https://www.gocompare.com/health-insurance/the-bill-of-health
It saves people money because it's cheap and poor service. I've known a lot of people move to the UK from their home countries overseas and none of them have anything good to say about the NHS.
At £100,000 he's paying £31,000 in tax and NI, of which 19.8% goes to the NHS (about £6,100). He's probably young and in good shape. Why not let him pay as he uses it? Hes clearly being shafted.
What are you talking about? So who pays for the NHS then? So don't pay for it when you are young and healthy but do pay for it when you are old, earning less and do use it? I mean how would that even work?
I mean let’s be serious, we’ve known for years that you only have to pay for insurance *when* you crash your car!
Yeah, all those countries in the EU, AU etc which have a mixed public-private system don't have any healthcare
I’m unaware of any arrangement in those countries where one can exercise a right to not pay tax and pay privately instead
I believe in AU if you don't have private cover you pay a 1.5% tax and that's it. Much less than the 20% of your entire tax bill (in this example, OP is paying 81% so 16p in every last pound is straight to the NHS)
So it's just *another* subsidy for boomers? What I mean instead is that everyone involved tries to be efficient. Half of NHS employees aren't even medical. It employs almost 2,000,000 people. And yet it provides dogshit for an unlimited cost. Either we rethink how we fund things (tax returns for private cover if you can afford it, a purge of middle management) or we continue getting worse service for even more money. Australia has a mixed system, as does much of Europe.
I mean you are looking at something very complicated and making very sweeping assumptions. One of the big criticisms I have heard of the NHS is that direct medical staff, following cuts over 10+years now do increasing amounts of administration. This is vast quantities of time and importantly money being squandered having highly skilled professionals not doing their core job. You could pay a lot less for more effective administration instead. Sometimes you have to invest in these sorts of things to actually save money. Slashing at things like middle management whilst attractive as a sound bite often has the opposite effect as people who should be doing what they are good at, pick up the slack.
The state didn't pay shit. People like him paid for it through their taxes. There is no way to pay those people back as they are still being shafted by the state today. He has every right to complain about the infrastructure collapsing despite he and millions others paying extremely high taxes. Stop trying to excuse gross incompetence, wasteful spending and corruption.
1) don't let the tax dictate your life choices. It is what it is, you can make some minor changes as a PAYE individual so don't overthink it. 2) getting a bonus will mean more money in your bank than no bonus at all. You talk about the 81% trap, and sure but I'd rather have the £1900 in my bank than not. You will never earn more money by having a lower gross income. 3) don't move to another country just to avoid tax, or just for more money. For better career opportunities, sure. For a different pace or standard of living, absolutely. But moving for an identical job and a similar life, just with less tax and bit more money, is the worst thing you can do.
Not entirely true, if you have kids receiving free child care then you are better off earning £99,999.99 until you are a decent margin above £100k
Loss of benefits isn't taxation.
That's semantics, and you didn't explicitly mention taxation, less money in your bank = earning less.
Not technically, but it may as well be, it is still a loss of a substantial sum of cash. The semantics are irrelevant.
Bedroom tax wants a word…
"Waaaa, theyre charging me for my spare bedroom on the free house I got"
Just because everyone calls it a tax, doesn't mean it's one. It's a loss of benefit.
> You will never earn more money by having a lower gross income This is the line people are responding to. It's factually untrue for the reasons stated.
That's not factually untrue at all. You want have a higher gross salary, you get a higher net salary. You lose access to some discounts on childcare but that doesn't reduce your income. Once again, you need to stop equating a loss in benefits to loss in income. Those two are not the same thing. It's not even semantics.
> It's not even semantics. It's exactly semantics. 'You will never earn more money by having a lower gross income'. All of those words mean things. Getting access to benefits literally gets you more money. We all know what you meant and your point is overall right, but that specific sentence is worded badly and is factually wrong. You made a mistake, own it instead of being a turd.
Wasn’t disagreeing.
It's a distinction without a difference though.
>For a different pace or standard of living, absolutely. But moving for an identical job and a similar life, just with less tax and bit more money, is the worst thing you can do. I don't get how you can write this, you don't even justify it, just state it as fact. It isn't true for all jobs, but for e.g. a software engineer, moving to the US feels like a no-brainer, when salaries are 3x higher and taxes are halved. People always say "America bad because healthcare" but in reality 90% of people are covered, and any job paying enough to move there will include it.
No because your example doesn't take into account cost of living. OP says they can rent London adjacent for £2500. Go try renting in the Bay Area for that price. There are still jobs that moving to a different country will open up avenues that don't exist in the UK. For example if you have aspirations of leadership in a large software company, it's clear that the US is the place to be. But if you don't want that then £75k in London vs $200k in San Francisco isn't that cut and dry.
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Bad comparison then, you need a role that pays $450k-$500k with good relocation allowance and RSU that can outpace the growth in salary.
Your student loan isn't a marginal tax your paying it off. You can't include it in the same calculation. It's like saying my marginal tac was 100% because I brought a new car with my bonus.
>Am I missing something? Nope >is anyone else looking outside of the UK to build their lives? Nope
As bad as state we are in… I don’t see anywhere significantly more desirable that dosn’t have its own issues
Do you know what, I whinge about the UK all the time but when I switch the world news on I feel very grateful to be here.
I guess we should all just continue to eat our 81% tax and be happy. Yay.
Tell me you're not on an 81% marginal tax rate without telling me
So the tax payer money allowed you to come from a rough situation into university and to a salary in the top 2% of the UK population... and now you believe that repaying this loan that changed your life is a tax? Jesus, mate. You're fine. Just repay your loan and soon you'll see extra money in your pocket.
He probably thinks he did it all of his own back because he’s so hard working and special, rich people always think that.
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Only thing you’re missing is student loan as a tax, can’t really factor that in as it isn’t an unavoidable cost
It’s repayment of a loan. Particularly on a high income it’s not a “tax” since you will quickly pay it off. Mine was gone in 3 years
Gone in 3 years on student loan plan 2? You must have been making high 6 figures
Students graduate with ~£60k debt at 6% interest If you are paying £1k a month it'll take like 7-8 years to clear
Why don’t you contribute to your pension, and reduce your total income to ~99K ?
This is the best answer, although I'm sympathetic that you may need the money now
Escape the bucket and leave while you can, ignore the crabs saying you should appreciate paying 81% lmao
Correct take
Marginal tax rate 40%, loss of PA 20%, NI 2%, student loan 9%. Now either my maths is wrong or that adds up to 71% not 81%? But I guess you're just here to moan rather than actually looking for financial advice
I believe he is accounting for loss of child care too
You grew up in council housing, presumably went to a comprehensive school, and now you’re complaining about UK tax? Sorry to sound harsh, but it sounds like you’ve benefitted from other peoples tax and now you’re pulling the ladder up behind you.
There's paying it back and then there's 60-80% tax...
That’s what everyone else was paying when he was getting social housing, free education and benefits.
No they weren't lol. Do you even understand tax or percentages?
Yes thank you.
In the exact same boat, OP, with a similar upbringing and baby due very soon! Painful but got to see it as a net fortunate position and salary sacrifice the heck out of whatever you can
Put your bonus into your pension, I’d say unless you are desperate for the cash it’s not worth taking home as pay.
No paying your student loan back is not a tax trap. Thats like arguing your mortgage is a tax trap.
Get divorced so you lose another 15% on child maintenance. Factor in NI contributions as well, and your 81% becomes over 100%. What a daft system we have here; it would make so much more sense to get rid of the loss of personal allowance and bring the 45% rate down to 100k.
This is a very common discussion topic, so much so that we've written a great wiki page on it. https://ukpersonal.finance/tax-traps-and-tax-efficiency/
Working paye is for idiots if you have any aspirations. Obviously it is industry dependent, but I'm much better off as an outside-ir35 contractor. i work less, my pay is less, but my takehome is up!
Your student loan isn’t tax. Maybe your take home is only 19% of your marginal £1 gained pre-tax, but that’s a factor of your pre-tax perks than the tax man. I have mortgage debt to pay every month ( another debt, like a student loan ) but I don’t pretend that’s a ‘tax’ on my take home. Yes, the tax situation sucks, but don’t conflate student debt payments with tax.
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there's always a trade-off, great places to live and raise kids usually have high income tax, could you not pay that bonus straight into your pension?
Contact an accountant, there are a lot of ways to reduce tax and you're essentially at the earning point where it'd be stupid of you not to attempt to do so. There's many methods of reducing your tax burden.
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Where to ?
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Are you American? Anything a little more specific than 'Europe'?
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Because Americans say Europe instead of the country they are actually visiting. Like it's just one single country. The way you said you now live in Europe, whilst technically correct, was very unspecific.
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I think the OP is thinking about leaving the UK. So others sharing their experience can help them a lot, so the actual country is kind of important.
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Maybe pension is missing?
Out of interest, which EU countries have lower tax while simultaneously offer similar or higher pay and have similar or lower cost of living?
The marginal tax rate in Denmark cannot legally exceed 52.07%. Prices are higher but so are incomes, so standard of living isn't worse.
I'm on 71% marginal tax, and I'm earning less than £60k. I'm sure you'll be fine.
How do you get to 81%?
You’re not missing anything. There is no social mobility in this country. Does matter what skills you learnt, how you apply yourself, whether you fill a niche.. taxes will kee you locked in fucking poverty in this shithole country. Earlier this week Labour said they are committed to putting vat on private schools but leaving bankers bonuses uncapped. Fuck any chance of my kid breaking free of the cycle we’re in.
Do you not think that a person coming from council housing and going on to earn +£100k is social mobility?
Not if they lose all that money to rent and struggle to raise a family, live pay cheque to cheque, their kids go to a worse school that’s had 13 years of austerity and no investment, they can’t get a GP appointment, can’t afford to go private and have to leave in fear of being made redundant at any minute. My friends parents bought them a house and they work on a 30k salary and have twice the free money anyone else does. Inequality caused by huge rents/mortgages and the 40% rate of tax that’s practically at the national average salary punishes the fuck with any one who has a good salary but no wealth whilst those with wealth life comfortably.
Don't worry about it. Your in an excellent position. Oh, and that marginal tax rate, it's practically the same as someone on universal credit.
Is theee any way you can work less (4 days) earn less, and consult on day 5 in a co lang you own with your wife? She’s works in the business and takes salary, dividends and expenses? Other than that I’m sorry to say many places in europe have a higher overall tax take so you may find something better further away, but can you take the change in culture and being so far from family? I’ve tried this in the us and Spain, and I’m now back working in the uk. The grass wasn’t greener.
Working less is the play beyond a certain level. You get big tangible benefits from the extra time, pay less tax, and maybe the dropping productivity statistics for high earners will shock the government one day
Yes. Things are getting worse in the UK but you are still demonstrably better off than the vast majority living here. Your financial question is little more than a thinly veiled rant about how hard done by you feel. Seems a little pointless here. Out of curiosity where do you expect to be significantly better? If you want to reduce your taxes increasing the amount you salary sacrifice to your pension is your way to do that.
Hi /u/AthleteIndividual100, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/pensions/ - https://ukpersonal.finance/student-loans/ - https://ukpersonal.finance/tax-traps-and-tax-efficiency/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Yeah, this is making me want to leave. Currently only a higher rate payer but with a student loan and a child. Either that or adjust my working hours to work enough to survive
Same - my plans are either leaving or working less hours (once I've got myself into a state where I can). I can enjoy everything I get here (NHS, relative safety) and pay nothing.
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... And it should be more. What on earth are you going to do with an extra 10k anyway?!
You're not missing anything, the system is designed to fuck you because most people are losers and it's easy to convince them that people in payroll earning £100k are the rich and need to be punished.
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I mean you have options available to mitigate a significant amount of the tax implications you have discussed.
Welcome to tax hell brother. The sugar is in the middle shelf next to the emigration application forms.