Egg Centric
Established Member
I don't consider anyone who has to work to be rich, tbh. The key thing is having enough capital to generate an income while still growing the capital. And that's wayyyyy more than someone on 150k typically has.
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The Labour Party under Andy Burnham
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I don't consider anyone who has to work to be rich, tbh. The key thing is having enough capital to generate an income while still growing the capital. And that's wayyyyy more than someone on 150k typically has.
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RailUK Forums
HENRY (High earner, not rich yet)
Tetchytyke
Veteran Member
There’s lots of evidence people don’t understand it, hence the recent media coverage of people alarmed that their total student debt is accelerating faster than they make repayments. They don’t understand that it doesn’t really matter because everything gets wiped at 30 years (old scheme) or 40 years (new scheme).
There's plenty of media coverage of people complaining about 15 minute cities. It doesn't make it reliable evidence.
It also isn't always 30 or 40 years. Mine is 25 years. So mistruths like this, and like the mistruth that you won't be worse off earning over £100k don't help.
Tetchytyke
Veteran Member
Neither of those things are “mistruths”, no matter how determined you are to crowbar in irrelevant edge cases into the conversation.
Yes, my student loan, and the millions of others in my peer group, are irrelevant? 1 in 8 current student loans are Plan 1 loans on 25 year write off terms.
They're not edge cases. These are real things which you seem to brush aside as irrelevant. Even against what the IFS says.
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Egg Centric
Established Member
It is 100% the case that earning a little over 100k makes you worse off than earning slightly less if you have kids that go to nursery in the free childcare age. I don't understand why you'd think otherwise. It's also nowhere near an edge case as those earning a little bit but not substantially over 100k are damn likely to have nursery age kids.
Now in practice depending on your circumstances if well advised (or even just google a bit) you can often get around this with salary sacrifice etc. But doctors and some others are in a particularly pernicious position that this often isn't possible, because the main salary sacrifice go-to is to bung more into your workplace pension which they usually can't.
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Yup, although 100k in London is never going to make anyone rich. You can live comfortably enough on that sort of figure up here (very comfortably indeed if you are single!), but I wouldn't want to try down there. The cost of living is just nuts in that hellhole.
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You can still live pretty comfortably in London on £100k. It's a take home pay of £5k after making a 14% pension contribution.
A 2 bed flat for around £2.5k/month in west London. That's the biggest expense really. From there you could cycle to work (negligible cost) or pay £172 for a Zone 1-2 travel pass.
I found most other things were available at the same price. Supermarkets don't do regional pricing (except the convenience stores) so the cost of a 'big shop' in London is the same as in Hull. Eating out can be more expensive, but equally for every expensive restaurant there's a hole in the wall or market place doing a cheap meal. For every pub selling pints for £7 there's another selling them for £3-4. That sort of thing.
Council tax is also much cheaper in most of London, so some of the cost is offset by that.
The rent/mortgage costs are the killer.
But yeah, about £2k/month spare for food and fun isn't bad.
London wasn't really my cup of tea though!
Agreed. On the other hand, there's a perceived missmatch between the lifestyle people feel they "ought" to have on a £100k+ income and the reality. That was the take of the Guardian article I shared upthread
Egg Centric
Established Member
A reminder that you're traditionally meant to spend up to 1/3 of your takehome on housing... It's the demented situation of the housing market that makes you even consider 2.5k/month. Plus the whole renting thing, fine for someone there for a couple of years but not a long term plan at anything like that sort of number, utterly stuffed come retirement. You also didn't mention non-pension saving.
Sure but the point is that despite that, it is clearly possible to live comfortably on £100k in London.
With ~£2.2k/month for food and fun, there's plenty of scope for savings there as well. In fact you could still max out your LISA+ISA allowances on that to save a house deposit, holiday a couple of times a year, eat well, etc.
Tetchytyke
Veteran Member
According to the Telegraph, wages peak on average at about the age of 47. The average age of mothers at birth is 31. Half of all families only have one child, and the average number of children per family is 1.7.
So on average a 47 year old with a child will have one child and that child will be aged 16.
Therefore I really don’t think we’re talking about significant numbers of people at all who are in the narrow band of people who are marginally worse off after the cliff edge loss of childcare help. Anyone with one child is better off at £105.25k, with two at £110.5k.
The poster I was replying to was trying to argue that someone on £125,000 would be worse off because of the childcare. Which is only true if they have six children.
I think tapering the help would be a good, easy, cheap win politically. It doesn’t affect many people therefore the cost of doing it would be negligible, but it sounds good. But these people really aren’t anything more than an edge case.
brad465
Veteran Member
I'd personally scrap all allowance-based tapers so they have no cap, including keeping all personal allowance regardless of income. As a trade-off, I'd put the 45% rate up to 50%, while any other shortfall could come from increased productivity enabled by workers deliberately suppressing their workload to avoid hitting the existing cliff-edges.
There are more of them than you think. Your analysis is flawed by assuming that £100k to £125k is peak earnings for these people. It often isn't - high flyers get there earlier than 47
Tetchytyke
Veteran Member
However the negative effect isn’t cumulative, it’s only an issue for people earning between £100k and £105k (with one child). So for people who are still on an upwards salary trajectory, it’ll be nothing more than a blip, at 3% wages inflation it’ll only be one year. Obviously slightly longer for people with two children.
We’re really not talking about many people.
Egg Centric
Established Member
How much do you think nursery is? Your figures are way off.
Tetchytyke
Veteran Member
The maximum help you can get for childcare costs is £2,000 per child*. It doesn’t matter how much the nursery is, the help is capped.
For every £1 you earn between £100,000 and £125,000 you keep 38p.
£2,000 x 38% is £5,263. So you need to earn £5,263 to replace the £2,000 you lose in childcare help.
Therefore, if you have one child and earn more than £105,263 then you are still better off than someone on £99,999. For two children it would be £110,526.
Obviously if your pay rise is less than £5,263 you will be slightly worse off. But it is a rather slim window and most people won’t fall into it, and won’t be in it for very long. It’s an edge case, nothing more.
(*it’s actually a limit of £500 per child per quarter)
You seem to have missed the other scheme I linked to in #3162 https://www.railforums.co.uk/threads/the-labour-party-under-keir-starmer.272035/post-7653202
30 hours of free childcare per week is an awful lot more expensive than £2000 a year.
The poster (me) was actually referencing a Financial Times article which cites an IFS model showing that two years ago, a family with two children under the age of 3 paying the average London childcare costs would be worse off until they reached ~£149k.
Are you suggesting the IFS has magnificently miscalculated this and that the FT have not done their due diligence on the claim? Because they're both pretty reputable sources.
If so, I think that's a pretty bold claim and one worthy of a whole new article in the FT if shown to be true.
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Egg Centric
Established Member
Exactly. It's an enormous difference and there's not even a taper. It's completely binary.
Parents also face a pretty vicious taper as child benefit is withdrawn. And there are plenty of other cliff edges (e.g. WFP, if they'd had the guts to go through with it, VAT threshold, etc etc) and absurd marginal rates (UC taper) in the system. A marginal tax/benefit chart in this country resembles a silhouette of a city. The incentives are crazy.
I am really looking forward to MP basic salaries getting into 6 figures*, that'll learn them - especially since I'm pretty sure they can't sacrifice into their pension scheme.
*fwiw I think our MP salaries are far too low but that's a completely different discussion
I doubt you'd need to go as far as 50% to break even....
I would certainly ditch the personal allowance tapering because it makes no sense.
We did briefly have a 50p tax rate 2010-2013. Unfortunately this isn't a meaningful amount of time to determine the income it would generate, because when it was announced in 2010 people basically paid bonuses just before April instead of after, and when it was reduced in 2013, people delayed their bonuses and pension withdrawals etc until just after April. So the first and third year's data doesn't answer the right question, and the second year's data is just one year, during which the announcement for the drop to 45% had been made and people may even have delayed pension withdrawals etc they were going to make in that middle year.
I don't think it should have been dropped to 45% in the first place and I'm surprised Labour has chosen policies like capping salary sacrifice NI savings at £2k instead of putting the additional rate back to 50%. So much of their policy work appears to affect middle earners more than much higher earners. Ed Balls said Labour would revert the drop to 45% over 10 years ago, I don't see why Starmer and Reeves can't do the same today, and actually do it.
Agreed. They also keep doing complex stuff like the salary sacrifice and ISA changes. Complexity in tax is bad anyway and also increases the chance of unintended consequences
Yeah this also.
I know taking a complex system and simplifying it is itself complex, e.g. rail fares simplification, or taxes; but I do think it should be a policy objective at the moment to do this.
I used to work in finance in London and I knew people there who didn't know they were being hit by the 60% tax trap. And why would you? It's rarely talked about in the mass appeal news, not mentioned in the budgets. If you go to the income tax rates page on gov.uk it is mentioned, but it says you need to calculate your adjusted net income, which takes you to a page which then says to add your taxable income (links to another page 5 part page), then take off tax reliefs (links to another page which actually only talks about one specific tax relief - Maintenance Payments), then take off gift aid, then calculate pension contributions (only actually tells you how to do this for relief at source contributions), then add back tax relief for union contributions. I've almost switched off just skimming it. You've then got to mentally determine that if your personal allowance is reduced, this means an extra 20%, not 40%, because income tax bands are defined relative to the previous band, not in absolute values as they are publicly talked about.
One of my superiors at this job was in his last couple of years of repaying his student loan (Plan 1!), so he was taxed 60% income tax, 2% NI, 9% student loan on a whack of his income. I pointed out that as we had a salary sacrifice pension scheme he would more than triple that money by putting it into his pension.
I know that example is of a privileged person, but it illustrates the complexity of taxes I feel.
The benefits systems I find just as bad. I don't actually understand the benefits my mum gets. If she asks me my advice is go to Citizens Advice because I'm sure I'll make a mistake somewhere.
Apparently the latest instance of this is in the Renter’s Reform Act. This will convert fixed-term contracts into periodic tenancies. However, when the cumulative rent paid under a periodic tenancy hits £125k, the tenant becomes liable to pay Stamp Duty.
Completely ridiculous policy.
And £125k may sound like a lot but our rent in London was just under £20k a year. This was for a 2 bed flat with both of us earning roughly the median London salary initially. If we'd stayed in London we would've stayed in the same flat probably, and be liable for this during year 7. The 1% SDLT bill would've been about £150.
It wouldn't have forced us to move out or anything clearly, but it surely isn't economical to administer this charge. Most people will move more frequently than we did in London or buy somewhere at some point. The number of people caught by this will be very small, probably goes underreported and unpaid because HMRC don't track our tenancies, and the cost of someone processing this payment when the whole system is considered is probably more than £150.
See also the complexity of pensions tax when the Annual Allowance taper sets it. I struggle to work it out and I'm a qualified actuary with two maths A Levels.... I tried to explain it to my American boss and her mind was completely blown
By contrast, I gather that prescriptions are free in Scotland in part *because* it was simple (and a huge proportion of prescriptions are for people who are old, young or very sick and get them free anyway)
By contrast, I gather that prescriptions are free in Scotland in part *because* it was simple (and a huge proportion of prescriptions are for people who are old, young or very sick and get them free anyway)
I'd be interested to know if prescription charging in England is cost effective.
In Wales, they abolished it because 90% of people were eligible for free prescriptions on account of age, benefits entitlement, etc. their bill for free prescriptions went up from £590m to £593m over the course of 8 years, which was a real terms decrease.
Free prescriptions 'saving Welsh NHS money for 10 years'
The policy has been keeping people out of hospital for 10 years, the health secretary says.
www.bbc.com
I am assuming that is only the direct cost, so ignoring the cost of administration, or even the health benefits of people getting medication they may otherwise not have.
317 forever
Established Member
In particular, the demographics in the Manchester part of the seat favour the Greens more, even if the Tameside areas favour Reform more.