i really don't want to load my pensions - but it's seemingly like really the only option i have left to regain some financial dignity.. i'm just awe struck with how hard i work to justify raises/career progression but the whole marginal tax situation has honestly killed my enthusiasm. any advice?
paying 60%+ marginal tax, earnings are above £100k atm so i know it's a whole tax trap - just need some practical advice or some reassurance there are opportunities to improve this situation. i have been tinkering on the option of leaving the UK entirely.
*included in tax calculation is SFE (plan 2) which i regard as a tax (about 4 years at current salary to pay it all off w/out addtl contr'), NI, regular tax
chart below effectively shows my most recent pay rises over the last 4 years and compares gross comp increase to net comp increase and shows both the effective and marginal tax rates
It's really simple: Yes there should not be a 60% marginal tax rate between 100-125k, no there's nothing you can do about it.
The government does not let you avoid PAYE income tax and maintain liquidity. This is similar in most developed countries.
I.e. in order to save on present day income tax, you have to sacrifice present day liquidity. That's it. Pay into your pension (or other salary sacrifice scheme which your company may or may not choose to offer you). Or pay the tax.
I guess you can also defer bonuses and stuff. Again, all comes down to sacrificing present day liquidity.
What else do Brits usually include in the tax calculation besides the student loan? Mortgage? Car leasing? Holiday travel tickets to Spain?
What you are experiencing is deliberate government policy. With large increases in the minimum wage (now £24k for a full time worker) and with high earners losing all tax benefits (no personal allowance, no child benefit, higher taxes on interest/dividends/capital gains) the multiple of what high earners make relative to those on minimum wage has collapsed. Despite this, the cost of living in London keeps increasing and you get less and less for paying more and more tax.
As a PAYE employee there is nothing you can do. You can salary sacrifice into a pension and take advantage of the ISA stocks & shares annual allowance (although I suspect Labour will come after that soon enough too). All you can really do is live within your means and try to get on the housing ladder. As the country ages, pensioners will demand more spending on pensions and healthcare which will require further income tax raises (I can see the top rate going back to 50% again). I really love London but it's getting harder to justify staying here as a PAYE employee.
looks like it, i've already moved out of london to alleviate the cost.. but honestly i don't think it's helped all that much.
i am not natively from england, so the opportunity to leave is still fairly compelling. wanted to know if there are any other real options before i pull the trigger. appreciate the sound advice from all above ^
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You are better off working part time and on benefits.
Seems 'long covid' only exists in the public sector/civil service. The biggest untold story of this Labour government will be the 8 million people out of work
https://www.theguardian.com/society/2024/oct/03/number-of-people-in-uk-…
In the same position and I am in disbelief that this is how the country works. Completely contrary to virtually all economic theory and basic productivity logic.
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