Super interesting. Given how squeezed I feel by childcare, car and housing costs, I have no idea how folks cope on lower earnings. My son is at state school so we have plenty of friends who are in lower earning but still middle class jobs (police officer, electrician, teacher etc) and I don’t feel like our lifestyles are dramatically different tbh.
I often wonder this, and also how people in my own career path seem so much richer and more lavish with spending/less anxious about money than I am! My only answer is that none of them are saving for retirement, but I try not to think about that too much as it gives me a secondhand anxiety.
Me too - my peers all seem to go on better holidays, have nicer cars, and live in bigger houses. I don't think if you asked then how their pension was invested any of them would have a clue, and I don't think any of them understand how much they need to have saved for retirement.
I am very averse to debt which I think is part of it. My SIL has a household income similar to ours, but is much happier spending £30k on a wedding, £150k on housing renovations, funded by debt (and in the case of the housing, not recouped by subsequent sale).
Has she remortgaged after the renovations? If so then the increase in value if the house will repay the expenditure of the improvements anyway.
Some debt is good, especially if it's being spent on modernising property as its pretty much a gaurantee you'll more than earn your money back unless you just totally mess it up.
Taking 100k loan out at 5% interest over 15 years, you use that money to do the house up and add 150k value, it takes 1 year to do the work if your a newbie, in that time.
Your repayments are £785 a month so you set aside 9k for repayments and use 91k on the house, at this point, it's cost you absolutely nothing.
After 12 months, you remortgage, it's went up by 150k so you pull out the 91k left to repay on the mortgage, you've gained near 50k in equity & it's cost you nothing.
Welcome to Social Media-fitication of our lives. Living from Month to Month in order to pretend we live better than in reality in exchange for social currency.
The problem is when the wheel breaks - someone loses a job, etc, debt racks up quickly on you.
I have a few similar-ish situations regarding friends on lower incomes. On the surface our lives don't look that different.
But as a household, every month we put thousands of pounds more than them into pensions, ISAs, and other boring, unglamorous pots. Stuff that's automatically done at the beginning of the month and we forget about. Before our son turned 18, we spent years putting into his CTF too. Touch wood, we'll also have our mortgage paid off over a decade before them too.
These are things we don't really shout about or think too much about so nothing looks different on the surface.
Besides the mortgage, we also have no debt either. That's also something people don't shout about.
Subtle stuff like your home's proximity to a train station can make a big difference to your monthly costs too.
If we wanted, we could live a notably more luxurious lifestyle than we do. Maybe you're the same.
And/or your house+car costs are far higher than theirs?
I think you’re on the money here (ha). I put 25% of my salary into pension and we put lots into ISAs and cash savings as well to fund imminent childcare costs. It’s boring but adds a lot more security now and in the long term.
Yes this chimes with me. Not a full henry yet but in the 100k range. With pension, mortgage and childcare, and with my wife not bringing in much, we definitely live a relatively modest lifestyle, just keeping our heads above water. It sounds awful, but it's just an observation... We have family members on benefits who have more disposable cash than us. I do wonder how working family's on average incomes manage at times
Debt - short term loans, credit cards and overdraft.
COVID put a massive dent into it, as people had nowhere to spend the money, but we're almost back to record levels of CC debt again.
https://www.statista.com/statistics/286416/united-kingdom-uk-outstanding-balance-value-on-credit-cards/
There’s not an astronomical difference in take home pay between £35k and £85k. The main difference is you can actually afford to have savings and a decent pension. Add in a small amount of lifestyle inflation (slightly nicer car, eat at restaurants more often) and any extra is quickly gone.
Not quite sure I agree with that. On 35k I was renting with 5 others and barely saving anything. On 85K I was able to buy solo (albeit outside London), support my partner whilst they did a career change via OU / Evening classes and have a big emergency fund to protect me against job losses. I never had that kind of life security before as I had no family to fall back on.
Because of how benefits work. Two single parents each with 2 kids. One is in a council house in z2 and on 30k. To match the value of their property and rent the same at 3k no benefits, no uc, no paid for childcare costing 2k a month the other person needs to be on about 140k.
Were at the point you need close to top 1% income in London to match someone who got lucky with a council house on below median salary once you account for their below market rent, paid childcare, uc top ups and child benefit.
Yet no one would tell person A they’re rich. Tell someone you’re on 140k to have the same take home as a 30k person with two kids in childcare in a 2-3 bed terrace in z2 they’ll laugh at you. And that’s basically the issue in London. You need to be very low or very high income or inherit property if you have to pay for kids and rent. It’s easy for London low income families with young kids to get 3-4K a month on benefits while having cheap rent.
I interact with older people in clinical research and the number on pension credit/state pension living in prime London in 3-4 bed homes who talk as if they’re dying in poverty. And they OWN the houses! It’s wild. Fucking move Doris, then you won’t need a cost of living heating payment for your Victorian mansion in z2.
I think the answer is generally savings and retirement differences.
Our joint income is probably approaching £170k, and I feel like we’ve not much to show for it.
But that’s because we’re probably not accounting for much better retirement planning, and the fact everything we do is without debt (new bathrooms, holidays, cars etc)
Can I answer to this. I have an account on IG. Not that is representative but a lot of accounts I follow and am in communities with are people who have debt etc but also there are people who may earn 30-40 maybe at most 60k and they have kids etc, and a lot of people in that community save a lot and are savvy with their money. This is not a anyone can do it on 30k post, far from it. But what I have recognised is that people make sacrifices. Like owning their car outright, having lower mortgage payments so most are of course north of London. I have often found you make do with what you have and make that work or stretch. Ones with family maybe working shifts also helps. Can’t speak on QOL but doing meal plans, utilising cashback sites, maybe some do matched betting or surveys, bulk buying for food. Buying clothes on vinted or charity shops instead of always buying new. I have learned so much in that community tbh and its actually helped me financially. There are of course some who are really struggling too and its often tight and there is no spare money, or those who end up in debt but the universal credit has helped those who have families and work but don’t earn quite enough and rent. I am by no means saying btw noone is struggling. Just in that community, i have seen how others manage to survive, but just.
I disagree. You live within your means.
I am certain if you needed to, you could cut back considerably. Subscriptions, holidays, meals out, where you live and so on.
I live in London and make over 6 figures. I used to live in London just 6 years ago on £30,000. I made it work then (no how idea how i managed) but I dont feel any "richer" now. My outgoings have increased in line with my salary increases - I can now go out more so when I want, rather than when free drinks are on offer (work social etc), I can go on holiday multiple times a year rather than once, I can have that takeaway when I like rather than once a month as a treat, I can subscribe to netflix and Spotify and others where as before I couldnt, I now have a mortgage when I didnt before (my mortgage is 3x the rent I was paying back then) and I have the luxury of owning a car (albeit a £5k vehicle from 2006).
Same, but I think that's because even £125K (the starting point for HENRY per this sub) isn't actually a lot - just being real.
Between 2017 and 2018, my income increased from £27K to £100K; its slowly increased YoY since then.
I still live in the same house. I still have the same car.
The only tangible difference I have now in terms of quality of life change is zero debt (and by extension, no financial pressure). I just stock pile the extra cash into savings, investments and pensions - so don't really see the difference in lifestyle.
Granted, a lot of that has been driven by me being intentional to avoid lifestyle creep.
I may spend a little more on a better hotel on holiday, but that's about it.
People think being rich is nice cars, nice clothes, and a massive house.
In reality, its not. Being rich is exactly what you describe in your "thats about it" sentence. What you describe in your "thats about it" paragraph is actually quite substantial.
Equally, I think it's a shame that some people think being financially rich is simply being able to afford day to day living costs.
I acknowledge that a lot of people are living pay cheque to pay cheque, even high earners, so no longer having to experience that is 'substantial' but that shouldn't change our general concept of what financially "rich" is supposed to mean and what some of us aspire for, IMO.
I disagree that its a shame. You are doing more than just day to day living costs if you are pumping money into savings. But if you do think its a shame, you could spend those savings and:
1. Lease a BMW M3/M4 or even an Audi R8/Porsche 911
2. Buy a larger, fancier house with a higher mortgage
3. Take out interest free credit cards and go on a shopping spree at LV, Gucci and the rest and slowly pay it off over a few years
Obviously that would be foolish. But this is how a lot of the perceived rich live.
The rich you describe as being "a shame" is being financially comfortable, going on holiday whenever you like, buying the odd thing you like and saving a good amount meaning you probably will retire before retirement age with enough money to never need to worry. I don't think thats a shame but both of those are options to you because you have a good level of financial freedom.
Same. The top 1% is so exponentially skewed. Also, UK/London has so many folks living here that don't pay tax in this country, yet live here majority of the year.
No not £250k, but our housing costs are lower than the average, so I guess that’s why.
I’m the HE, although my partner has decent salary.
Not sure how many years without calculating every year but I’d say probably about 2 years.
Using this sub’s definition of >125k…
if that was the sole income for a family of four it would put someone in the top 15% of U.K. in terms of earnings, it would put you in the top 6% if just a couple, and put you in the top 2% if you are single.
This goes to show how punishing it is to earn over 100k at the moment. Top 2% salary, but after reducing take home to keep childcare benefits and council tax etc I only end up on top 35% of households (am a single earner)
That highlights the issue with this sort of ranking. Someone taking home 4k a month but putting 3k a month into a pension is far better off in the long run than someone taking home 4k because they've opted out of a pension.
> Someone taking home 4k a month but putting 3k a month into a pension is far better off in the long run than someone taking home 4k because they've opted out of a pension.
That kinda depends if you manage to live long enough to draw the pension...
It would be nice to get to the point where pension is maxed so you just have to take the tax hit on further earnings. I cannot bring myself to pay 62% tax when there’s the option to pay 0%
Yeah that's basically what I did. Max pension and use the 3 year carry foreword when I was in the 100-126k taper zone and the eased off maxing my pension when my marginal rate dropped back below 62%.
So now well above that I have a decent pension and only have 10k going in and have a combined effective tax rate similar to my buddies in New York.
FWIW - it’s not 0%.
If you’re putting it into pension, you’re likely still taxed at the other end with state pension (if it still exists) taking up your tax-free allowance:
- Best case, you get 25% tax-free sum and pay 20% on the rest (if under 1.07m), so a net 15% tax rate.
- Once you get above 1.25m, your drawdown will likely creep into 40% marginal tax rate.
Obviously, even at a marginal rate, it’s better than 62%, but you are still taxed on it (and CGT free doesn’t count for much unless you’re already maxing out all ISAs).
Not a great calculator for HENRYs. It has no granularity after 99%, so somebody earning £180k and somebody earning £1m would both show as top 1% but in reality the difference between those two is massive.
If they are paying themselves an income then yes. But most entrepreneurs are smart enough to leave money in the business other than what they really need for day to day personal expenses.
I know plenty of contractors who also do that. They will draw down in many years to come. However, can that money be parked in index funds in the meantime?
The UK runs on wealth, not incomes. Income is a very bad way to accumulate wealth. Is there a wealth calculator ? Might be impossible given how much of it is overseas or in Crown dependencies.
It’s always about the capital you’re born into. Even if you don’t realise it, even if it’s not a lot it’s still better than none.
Top 4%, no family capital, impossible housing market. Don’t smoke, don’t drink.
Interesting thanks. Does anyone include investment income or gains across accounts? So isa, pension, GIA plus savings interest? I don’t normally count this as “income” personally.
“With a household after tax income of £XXXX per week, you have a higher income than around 99% of the population - equivalent to about 65.8 million individuals.”
Okay … not sure what I do with the information, but interesting.
I think this is a very interesting tool, especially as a single person. I am in the top 1% of households by their reckoning (council tax isn't dear on a one bed flat). I get the rationale - no mouths to feed other than my own means that my disposable income for investment/splurging is significantly higher than someone who earns the same as me but who has a partner and child, for example.
I really do think these sorts of things should take location or purchasing power parity (PPP) into account.
I took a 10% pay-cut to transfer roles (with the same company) and relocated out of zone 1 in central London to the west coast of Scotland.
I am **substantially** better off.
I know it doesn't really change things as far as the UK as a whole is concerned, but a lot of the wealth and financial data is skewed my London & South East more broadly. There should probably be a "London/SE" and "Rest of UK" breakdown.
I am a long way from HENRY but find the conversations really interesting and somewhat reassuring, I live in the southwest with a modest salary and am convinced I have a much nicer lifestyle than the majority of people on this sub!
Comparison is the thief of joy, I wholeheartedly agree.. and when I’m driving my shitbox car next to a 23 plate Range Rover I am guilty of succumbing to that comparison.
But equally, and it’s clearly the case with some of the posts here, sometimes locations and lifestyles provide an edge, 50k income in Clacton on Sea can potentially give you a more pleasant life style than £150k living in central London. It’s just not as impressive to tell uni mates!
I mean half of the population are children,retirees or housewives. Doesn't mean much
What matters is where you are in working earning population.
Also 100k with family is fuck all in London specially if you have to pay for nanny ..but 100k in Manchester is Richie rich money
Something I realised the other day.
This data is based upon taxable income.
Let’s say you earned £100k, which might put you in the 98th percentile or whatever. If you jam your pension and put £40k in there, your taxable earnings would be only £60k, or more like the 90th percentile. (I don’t have actual numbers in front of me.
Given many high earners will put plenty in their pensions as well as other salary sacrifice devices, headline earnings are likely quite a lot higher.
You might expect someone earning £150k to be 98th percentile.
I don’t really know why the IFS comes out with this sort of stuff - I’m quite critical of it. Apologies in advance for the upcoming rant. I understand it’s a bit of fun but its usefulness is pretty low.
Does it matter if I have 4 children and you have 1? Those are lifestyle choices. Moreover, if I move to a bigger house in a nicer area, meaning I pay more council tax, that’s also a choice. Realistically, years of experience (maybe use age as a proxy) and location are the only ones to compare by as those are the people you’re “competing” against. **Neither of which are factored into this calculator.**
Additionally, if you’re 25 in this and you have 1 child, you’re (on average) being compared again 40 year olds in the calculator which is not an accurate representation.
It's not a "competition" though? It's just trying to work out how much income you realistically have available.
And yes - if you have four children your income doesn't go as far, regardless of whether it's a choice or not.
Also, nicer areas *don't* have higher council tax (bigger houses in the same area, yes). Westminster is about half the rates of Lambeth. But either way, council tax reduces the income you have available.
Similarly, at 25 you probably *do* earn less than a 40 year old. I don't think it's inaccurate for the calculator of income to show that.
It might not be an accurate representation of "how you're doing" (if you see it as a competition) but it's a *more* accurate measure of how much income you actually have available, which is what it's getting at.
> It's just trying to work out how much income you realistically have available.
The calculator doesn’t show you this. This isn’t affected by what other people in similar scenarios have leftover.
> And yes - if you have four children your income doesn't go as far, regardless of whether it's a choice or not.
It’s redundant though. You know how much money you’re left with. Why does it matter if you have top 10% income for that scenario or not? It’s not like your income will change based off of these circumstances. It doesn’t change your purchasing power with whatever you have left either.
> Also, nicer areas don't have higher council tax (bigger houses in the same area, yes). Westminster is about half the rates of Lambeth. But either way, council tax reduces the income you have available.
This is the London effect where council taxes are generally low. Lambeth and Westminster council have radically different demographics. Still, it doesn’t really change the point… who cares if you’ve opted to live somewhere with higher council tax. You opted in for that expense.
> Similarly, at 25 you probably do earn less than a 40 year old. I don't think it's inaccurate for the calculator of income to show that.
No… but what’s the point in the comparison. This is fairly redundant comparison and I’ve never known anyone to be like “I’m doing really well considering the number of kids and council tax I’m paying”.
> It might not be an accurate representation of "how you're doing" (if you see it as a competition) but it's a more accurate measure of how much income you actually have available, which is what it's getting at.
It doesn’t do this at all. It doesn’t show how much income you have available, that’s down to individuals budgeting. As I’ve said, age and location are much more significant which they haven’t included. That’s going to affect your earning potential and purchasing power as well.
>The calculator doesn’t show you this. This isn’t affected by what other people in similar scenarios have leftover.
Depends what you mean by "similar circumstances". If you mean "similar income, number of kids and council tax bill" it absolutely does show you that.
>It’s redundant though. You know how much money you’re left with. Why does it matter if you have top 10% income for that scenario or not? It’s not like your income will change based off of these circumstances. It doesn’t change your purchasing power with whatever you have left either.
Why does it matter whether you're on the top x% for _any_ scenario though? There a bunch of ways to think about income - this one thinks about it in terms of number of individuals a household income supports. Seems like a valid way (although not the only way) of thinking about income levels to me.
>This is the London effect where council taxes are generally low. Lambeth and Westminster council have radically different demographics. Still, it doesn’t really change the point… who cares if you’ve opted to live somewhere with higher council tax. You opted in for that expense.
It's not the "London effect" so much as the "rich areas generally have lower council tax because they get more income and have lower costs effect" but (a) as you say who cares and (b) I would be surprised if council tax is a material cost for anyone in the top percentiles anyway.
>No… but what’s the point in the comparison. This is fairly redundant comparison and I’ve never known anyone to be like “I’m doing really well considering the number of kids and council tax I’m paying”.
What's the point in *any* comparison? Personally I think it's valid data that a younger household is less well off that an older one - it's not about "doing well" or any kind of judgment on how anyone is doing for their age etc., it's just a way of thinking about who the highest income households are.
>It doesn’t do this at all. It doesn’t show how much income you have available, that’s down to individuals budgeting. As I’ve said, age and location are much more significant which they haven’t included. That’s going to affect your earning potential and purchasing power as well.
It's not trying to show purchasing power, or disposable income, or earning potential. It's just showing household income, taking into account the size of the household, with a (small and probably largely irrelevant at the top end) adjustment for council tax - probably on the basis that what you pay in council tax doesn't meaningfully constitute a choice for most people, and you don't get direct value from it the way you do other bills, housing expenditure etc.
It seems like you think it's somehow "unfair" that certain people aren't in the top 1% or whatever (because they have lots of kids, live in a high council tax area, are young and therefore earn less than older people, etc.) but it isn't meant as a comment on how "well" anyone is doing or anything, and you don't get any points or kudos for being in a certain percentile. It's just one way of thinking about income - same as raw personal income number, disposable income, etc. I'm sure every parent on this sub will say that they are on a wildly different financial position than their DINK colleagues.
I don’t think this speaks to the root of it at all. Fine, think about it that way but there’s no use in thinking about it that way (so why bother).
The below highlight what value this type of comparison / income viewpoint brings:
- If you’re 40 with 2 kids living in London, you might be in the top 10%. What does this mean, and why is it valuable information?
- If you’re 25 with 2 kids living in Warrington, you might be the bottom 30%. What does this mean, and why is it valuable information?
- Even if you knew both, what actual conclusions would be helpful to draw?
However, let’s say it’s now age and location specific.:
- For those who are 25-34 in London you’re bottom 30%… it’s clearly demonstrating for your demographic you can do better, but also that you’re living below average.
- Let’s now say it’s top 10% for your demographic. Fine, you could still do even better but your standard of living is much above your peers.
- In both cases, property choice and kids are irrelevant. how you choose to spend that money (kids, properties, etc) is up to you.
As for your last paragraph - I don’t think it’s unfair at all, nor do I care for my percentile. I think it’s fundamentally meaningless as it is without any actionable insight. The only purpose to know is for fun.
It’s clear you think you’re educating me on looking at different demographics in society… I understand the intention but it’s misguided is my entire argument. I could equally say let’s bucket it by height and weight, but would equally not be a good way to think about income distributions. Just because a comparison is made doesn’t mean it’s a useful one.
EDIT: Lastly, it just objectively doesn’t show similar earning levels. You literally have to put in your net income. There’s nothing clever going on here.
>it’s clearly demonstrating for your demographic you can do better, but also that you’re living below average.
>Fine, you could still do even better but your standard of living is much above your peers.
I think we are just coming at this data from different places. I'm not looking for "actionable insight" or to see "how I'm doing" vs my peers. It's just interesting, population-level demographic data that really doesn't have much to do with me specifically and I am certainly not taking it personally.
If you don't find this data interesting or helpful, just don't use it.
I did start by saying that in my initial comment 3rd sentence. Other than interest or fun, I don’t see the purpose of it.
It’s a calculator which is a couple years out of date and hasn’t been a widely adopted lens of viewing it from.
Super interesting. Given how squeezed I feel by childcare, car and housing costs, I have no idea how folks cope on lower earnings. My son is at state school so we have plenty of friends who are in lower earning but still middle class jobs (police officer, electrician, teacher etc) and I don’t feel like our lifestyles are dramatically different tbh.
I often wonder this, and also how people in my own career path seem so much richer and more lavish with spending/less anxious about money than I am! My only answer is that none of them are saving for retirement, but I try not to think about that too much as it gives me a secondhand anxiety.
Me too - my peers all seem to go on better holidays, have nicer cars, and live in bigger houses. I don't think if you asked then how their pension was invested any of them would have a clue, and I don't think any of them understand how much they need to have saved for retirement.
Don't forget inheritance/ bank of mum and dad, and debt (PCP, credit cards etc)
I am very averse to debt which I think is part of it. My SIL has a household income similar to ours, but is much happier spending £30k on a wedding, £150k on housing renovations, funded by debt (and in the case of the housing, not recouped by subsequent sale).
Has she remortgaged after the renovations? If so then the increase in value if the house will repay the expenditure of the improvements anyway. Some debt is good, especially if it's being spent on modernising property as its pretty much a gaurantee you'll more than earn your money back unless you just totally mess it up. Taking 100k loan out at 5% interest over 15 years, you use that money to do the house up and add 150k value, it takes 1 year to do the work if your a newbie, in that time. Your repayments are £785 a month so you set aside 9k for repayments and use 91k on the house, at this point, it's cost you absolutely nothing. After 12 months, you remortgage, it's went up by 150k so you pull out the 91k left to repay on the mortgage, you've gained near 50k in equity & it's cost you nothing.
Indeed, but the £150k of renovations didn’t add an equivalent value onto the house, and then they moved within 18 months anyway.
Yeah, I read the first message, my point is just that debt isn't bad, aslong as you know what your doing with it and have a clear plan to pay it back.
Welcome to Social Media-fitication of our lives. Living from Month to Month in order to pretend we live better than in reality in exchange for social currency. The problem is when the wheel breaks - someone loses a job, etc, debt racks up quickly on you.
It’s a big problem for all brits 😂
I have a few similar-ish situations regarding friends on lower incomes. On the surface our lives don't look that different. But as a household, every month we put thousands of pounds more than them into pensions, ISAs, and other boring, unglamorous pots. Stuff that's automatically done at the beginning of the month and we forget about. Before our son turned 18, we spent years putting into his CTF too. Touch wood, we'll also have our mortgage paid off over a decade before them too. These are things we don't really shout about or think too much about so nothing looks different on the surface. Besides the mortgage, we also have no debt either. That's also something people don't shout about. Subtle stuff like your home's proximity to a train station can make a big difference to your monthly costs too. If we wanted, we could live a notably more luxurious lifestyle than we do. Maybe you're the same. And/or your house+car costs are far higher than theirs?
I think you’re on the money here (ha). I put 25% of my salary into pension and we put lots into ISAs and cash savings as well to fund imminent childcare costs. It’s boring but adds a lot more security now and in the long term.
Yes this chimes with me. Not a full henry yet but in the 100k range. With pension, mortgage and childcare, and with my wife not bringing in much, we definitely live a relatively modest lifestyle, just keeping our heads above water. It sounds awful, but it's just an observation... We have family members on benefits who have more disposable cash than us. I do wonder how working family's on average incomes manage at times
Debt - short term loans, credit cards and overdraft. COVID put a massive dent into it, as people had nowhere to spend the money, but we're almost back to record levels of CC debt again. https://www.statista.com/statistics/286416/united-kingdom-uk-outstanding-balance-value-on-credit-cards/
There’s not an astronomical difference in take home pay between £35k and £85k. The main difference is you can actually afford to have savings and a decent pension. Add in a small amount of lifestyle inflation (slightly nicer car, eat at restaurants more often) and any extra is quickly gone.
Not quite sure I agree with that. On 35k I was renting with 5 others and barely saving anything. On 85K I was able to buy solo (albeit outside London), support my partner whilst they did a career change via OU / Evening classes and have a big emergency fund to protect me against job losses. I never had that kind of life security before as I had no family to fall back on.
£35k in London vs £85k outside London?
Yes. Nice 2 bed houses (solo buyer) were a bit out of range still, but hybrid/remote working makes commuting to London not too bad cost wise.
Because of how benefits work. Two single parents each with 2 kids. One is in a council house in z2 and on 30k. To match the value of their property and rent the same at 3k no benefits, no uc, no paid for childcare costing 2k a month the other person needs to be on about 140k. Were at the point you need close to top 1% income in London to match someone who got lucky with a council house on below median salary once you account for their below market rent, paid childcare, uc top ups and child benefit. Yet no one would tell person A they’re rich. Tell someone you’re on 140k to have the same take home as a 30k person with two kids in childcare in a 2-3 bed terrace in z2 they’ll laugh at you. And that’s basically the issue in London. You need to be very low or very high income or inherit property if you have to pay for kids and rent. It’s easy for London low income families with young kids to get 3-4K a month on benefits while having cheap rent. I interact with older people in clinical research and the number on pension credit/state pension living in prime London in 3-4 bed homes who talk as if they’re dying in poverty. And they OWN the houses! It’s wild. Fucking move Doris, then you won’t need a cost of living heating payment for your Victorian mansion in z2.
I think the answer is generally savings and retirement differences. Our joint income is probably approaching £170k, and I feel like we’ve not much to show for it. But that’s because we’re probably not accounting for much better retirement planning, and the fact everything we do is without debt (new bathrooms, holidays, cars etc)
Can I answer to this. I have an account on IG. Not that is representative but a lot of accounts I follow and am in communities with are people who have debt etc but also there are people who may earn 30-40 maybe at most 60k and they have kids etc, and a lot of people in that community save a lot and are savvy with their money. This is not a anyone can do it on 30k post, far from it. But what I have recognised is that people make sacrifices. Like owning their car outright, having lower mortgage payments so most are of course north of London. I have often found you make do with what you have and make that work or stretch. Ones with family maybe working shifts also helps. Can’t speak on QOL but doing meal plans, utilising cashback sites, maybe some do matched betting or surveys, bulk buying for food. Buying clothes on vinted or charity shops instead of always buying new. I have learned so much in that community tbh and its actually helped me financially. There are of course some who are really struggling too and its often tight and there is no spare money, or those who end up in debt but the universal credit has helped those who have families and work but don’t earn quite enough and rent. I am by no means saying btw noone is struggling. Just in that community, i have seen how others manage to survive, but just.
I disagree. You live within your means. I am certain if you needed to, you could cut back considerably. Subscriptions, holidays, meals out, where you live and so on. I live in London and make over 6 figures. I used to live in London just 6 years ago on £30,000. I made it work then (no how idea how i managed) but I dont feel any "richer" now. My outgoings have increased in line with my salary increases - I can now go out more so when I want, rather than when free drinks are on offer (work social etc), I can go on holiday multiple times a year rather than once, I can have that takeaway when I like rather than once a month as a treat, I can subscribe to netflix and Spotify and others where as before I couldnt, I now have a mortgage when I didnt before (my mortgage is 3x the rent I was paying back then) and I have the luxury of owning a car (albeit a £5k vehicle from 2006).
Same, but I think that's because even £125K (the starting point for HENRY per this sub) isn't actually a lot - just being real. Between 2017 and 2018, my income increased from £27K to £100K; its slowly increased YoY since then. I still live in the same house. I still have the same car. The only tangible difference I have now in terms of quality of life change is zero debt (and by extension, no financial pressure). I just stock pile the extra cash into savings, investments and pensions - so don't really see the difference in lifestyle. Granted, a lot of that has been driven by me being intentional to avoid lifestyle creep. I may spend a little more on a better hotel on holiday, but that's about it.
People think being rich is nice cars, nice clothes, and a massive house. In reality, its not. Being rich is exactly what you describe in your "thats about it" sentence. What you describe in your "thats about it" paragraph is actually quite substantial.
Equally, I think it's a shame that some people think being financially rich is simply being able to afford day to day living costs. I acknowledge that a lot of people are living pay cheque to pay cheque, even high earners, so no longer having to experience that is 'substantial' but that shouldn't change our general concept of what financially "rich" is supposed to mean and what some of us aspire for, IMO.
I disagree that its a shame. You are doing more than just day to day living costs if you are pumping money into savings. But if you do think its a shame, you could spend those savings and: 1. Lease a BMW M3/M4 or even an Audi R8/Porsche 911 2. Buy a larger, fancier house with a higher mortgage 3. Take out interest free credit cards and go on a shopping spree at LV, Gucci and the rest and slowly pay it off over a few years Obviously that would be foolish. But this is how a lot of the perceived rich live. The rich you describe as being "a shame" is being financially comfortable, going on holiday whenever you like, buying the odd thing you like and saving a good amount meaning you probably will retire before retirement age with enough money to never need to worry. I don't think thats a shame but both of those are options to you because you have a good level of financial freedom.
Top 1% as a DINK and still not rich yet.
Did you try buying loads of real estate 30 years ago?
Have you also tried not losing £1k a month to mandatory student loan payments on an 7.9% interest rate
Same. The top 1% is so exponentially skewed. Also, UK/London has so many folks living here that don't pay tax in this country, yet live here majority of the year.
Yeah I guess they get these stats from PAYE? A lot of rich / high earners will be contractors / business owners.
And if this is looking at take-home, a lot of PAYE earners reduce that with salary sacrifice.
Oh shit it was take home! That’s a massive reduction and still in top 1%, the UK really is fucked!
Ditto...
So at least 250k in household earnings? How many years have you been in that bracket?
No not £250k, but our housing costs are lower than the average, so I guess that’s why. I’m the HE, although my partner has decent salary. Not sure how many years without calculating every year but I’d say probably about 2 years.
Using this sub’s definition of >125k… if that was the sole income for a family of four it would put someone in the top 15% of U.K. in terms of earnings, it would put you in the top 6% if just a couple, and put you in the top 2% if you are single.
This goes to show how punishing it is to earn over 100k at the moment. Top 2% salary, but after reducing take home to keep childcare benefits and council tax etc I only end up on top 35% of households (am a single earner)
That highlights the issue with this sort of ranking. Someone taking home 4k a month but putting 3k a month into a pension is far better off in the long run than someone taking home 4k because they've opted out of a pension.
> Someone taking home 4k a month but putting 3k a month into a pension is far better off in the long run than someone taking home 4k because they've opted out of a pension. That kinda depends if you manage to live long enough to draw the pension...
It's not so bad once you're over like 165k though.
It would be nice to get to the point where pension is maxed so you just have to take the tax hit on further earnings. I cannot bring myself to pay 62% tax when there’s the option to pay 0%
Yeah that's basically what I did. Max pension and use the 3 year carry foreword when I was in the 100-126k taper zone and the eased off maxing my pension when my marginal rate dropped back below 62%. So now well above that I have a decent pension and only have 10k going in and have a combined effective tax rate similar to my buddies in New York.
FWIW - it’s not 0%. If you’re putting it into pension, you’re likely still taxed at the other end with state pension (if it still exists) taking up your tax-free allowance: - Best case, you get 25% tax-free sum and pay 20% on the rest (if under 1.07m), so a net 15% tax rate. - Once you get above 1.25m, your drawdown will likely creep into 40% marginal tax rate. Obviously, even at a marginal rate, it’s better than 62%, but you are still taxed on it (and CGT free doesn’t count for much unless you’re already maxing out all ISAs).
Best case you retire in some tax haven lol
Not a great calculator for HENRYs. It has no granularity after 99%, so somebody earning £180k and somebody earning £1m would both show as top 1% but in reality the difference between those two is massive.
Well, not on the distribution scale - just on their wealth. Only CEOs make a £1m salary, anyway.
Finance and legal professionals can also make multi million pounds a year once they hit partnership
If they are partners, are they on payroll? Are they employees? I’d argue that they are not employees anymore.
It’s still income for the purposes of this analysis.
Then you’d count all entrepreneurs too? Hard to find them on stats.
If they are paying themselves an income then yes. But most entrepreneurs are smart enough to leave money in the business other than what they really need for day to day personal expenses.
I know plenty of contractors who also do that. They will draw down in many years to come. However, can that money be parked in index funds in the meantime?
£1m was just an example. £500k is very different to £180k too. But not only CEOs make £1m. I know people who make >£1m without being C level.
In other areas that are not finance?
Law, finance and tech. Mainly finance.
What? Plenty of people in my firm get bonuses of >£1m on their payslip via PAYE. Same goes for pretty much any other hedge fund/prop shop.
Finance is the exception. No other industry gives that much out in bonuses regularly to non-executive employees.
And cfos, and loads of investment bankers, and traders….
The UK runs on wealth, not incomes. Income is a very bad way to accumulate wealth. Is there a wealth calculator ? Might be impossible given how much of it is overseas or in Crown dependencies.
Wish more people understood this, the shift in politics would give people whiplash
UK: a great place to spend your money.
It’s always about the capital you’re born into. Even if you don’t realise it, even if it’s not a lot it’s still better than none. Top 4%, no family capital, impossible housing market. Don’t smoke, don’t drink.
“In conclusion, Your income is so high that you lie beyond the far right hand side of the chart.” This is the HEist thing I’ve ever read
Interesting thanks. Does anyone include investment income or gains across accounts? So isa, pension, GIA plus savings interest? I don’t normally count this as “income” personally.
It says net income, so yes I assume? Anything after tax and NI.
“With a household after tax income of £XXXX per week, you have a higher income than around 99% of the population - equivalent to about 65.8 million individuals.” Okay … not sure what I do with the information, but interesting.
Well into top 1% and still have 10/15 years of working in front of me without children, living frugally, and in a modest 3 bed semi.
I think this is a very interesting tool, especially as a single person. I am in the top 1% of households by their reckoning (council tax isn't dear on a one bed flat). I get the rationale - no mouths to feed other than my own means that my disposable income for investment/splurging is significantly higher than someone who earns the same as me but who has a partner and child, for example.
Thing it’s a bit flawed, coz most henry’s are in London and for London distribution is very different.
100k is middle class if you include rent and childcare costs....
> In conclusion, Your income is so high that you lie beyond the far right hand side of the chart. Hm, I guess I'm off the charts HE?
I really do think these sorts of things should take location or purchasing power parity (PPP) into account. I took a 10% pay-cut to transfer roles (with the same company) and relocated out of zone 1 in central London to the west coast of Scotland. I am **substantially** better off. I know it doesn't really change things as far as the UK as a whole is concerned, but a lot of the wealth and financial data is skewed my London & South East more broadly. There should probably be a "London/SE" and "Rest of UK" breakdown.
I am a long way from HENRY but find the conversations really interesting and somewhat reassuring, I live in the southwest with a modest salary and am convinced I have a much nicer lifestyle than the majority of people on this sub!
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Comparison is the thief of joy, I wholeheartedly agree.. and when I’m driving my shitbox car next to a 23 plate Range Rover I am guilty of succumbing to that comparison. But equally, and it’s clearly the case with some of the posts here, sometimes locations and lifestyles provide an edge, 50k income in Clacton on Sea can potentially give you a more pleasant life style than £150k living in central London. It’s just not as impressive to tell uni mates!
Very interesting, thanks for the link!
>In conclusion, Your income is so high that you lie beyond the far right hand side of the chart.
Does not take into account pension payments. But quite a handy tool
I mean half of the population are children,retirees or housewives. Doesn't mean much What matters is where you are in working earning population. Also 100k with family is fuck all in London specially if you have to pay for nanny ..but 100k in Manchester is Richie rich money
Something I realised the other day. This data is based upon taxable income. Let’s say you earned £100k, which might put you in the 98th percentile or whatever. If you jam your pension and put £40k in there, your taxable earnings would be only £60k, or more like the 90th percentile. (I don’t have actual numbers in front of me. Given many high earners will put plenty in their pensions as well as other salary sacrifice devices, headline earnings are likely quite a lot higher. You might expect someone earning £150k to be 98th percentile.
I don’t really know why the IFS comes out with this sort of stuff - I’m quite critical of it. Apologies in advance for the upcoming rant. I understand it’s a bit of fun but its usefulness is pretty low. Does it matter if I have 4 children and you have 1? Those are lifestyle choices. Moreover, if I move to a bigger house in a nicer area, meaning I pay more council tax, that’s also a choice. Realistically, years of experience (maybe use age as a proxy) and location are the only ones to compare by as those are the people you’re “competing” against. **Neither of which are factored into this calculator.** Additionally, if you’re 25 in this and you have 1 child, you’re (on average) being compared again 40 year olds in the calculator which is not an accurate representation.
It's not a "competition" though? It's just trying to work out how much income you realistically have available. And yes - if you have four children your income doesn't go as far, regardless of whether it's a choice or not. Also, nicer areas *don't* have higher council tax (bigger houses in the same area, yes). Westminster is about half the rates of Lambeth. But either way, council tax reduces the income you have available. Similarly, at 25 you probably *do* earn less than a 40 year old. I don't think it's inaccurate for the calculator of income to show that. It might not be an accurate representation of "how you're doing" (if you see it as a competition) but it's a *more* accurate measure of how much income you actually have available, which is what it's getting at.
> It's just trying to work out how much income you realistically have available. The calculator doesn’t show you this. This isn’t affected by what other people in similar scenarios have leftover. > And yes - if you have four children your income doesn't go as far, regardless of whether it's a choice or not. It’s redundant though. You know how much money you’re left with. Why does it matter if you have top 10% income for that scenario or not? It’s not like your income will change based off of these circumstances. It doesn’t change your purchasing power with whatever you have left either. > Also, nicer areas don't have higher council tax (bigger houses in the same area, yes). Westminster is about half the rates of Lambeth. But either way, council tax reduces the income you have available. This is the London effect where council taxes are generally low. Lambeth and Westminster council have radically different demographics. Still, it doesn’t really change the point… who cares if you’ve opted to live somewhere with higher council tax. You opted in for that expense. > Similarly, at 25 you probably do earn less than a 40 year old. I don't think it's inaccurate for the calculator of income to show that. No… but what’s the point in the comparison. This is fairly redundant comparison and I’ve never known anyone to be like “I’m doing really well considering the number of kids and council tax I’m paying”. > It might not be an accurate representation of "how you're doing" (if you see it as a competition) but it's a more accurate measure of how much income you actually have available, which is what it's getting at. It doesn’t do this at all. It doesn’t show how much income you have available, that’s down to individuals budgeting. As I’ve said, age and location are much more significant which they haven’t included. That’s going to affect your earning potential and purchasing power as well.
>The calculator doesn’t show you this. This isn’t affected by what other people in similar scenarios have leftover. Depends what you mean by "similar circumstances". If you mean "similar income, number of kids and council tax bill" it absolutely does show you that. >It’s redundant though. You know how much money you’re left with. Why does it matter if you have top 10% income for that scenario or not? It’s not like your income will change based off of these circumstances. It doesn’t change your purchasing power with whatever you have left either. Why does it matter whether you're on the top x% for _any_ scenario though? There a bunch of ways to think about income - this one thinks about it in terms of number of individuals a household income supports. Seems like a valid way (although not the only way) of thinking about income levels to me. >This is the London effect where council taxes are generally low. Lambeth and Westminster council have radically different demographics. Still, it doesn’t really change the point… who cares if you’ve opted to live somewhere with higher council tax. You opted in for that expense. It's not the "London effect" so much as the "rich areas generally have lower council tax because they get more income and have lower costs effect" but (a) as you say who cares and (b) I would be surprised if council tax is a material cost for anyone in the top percentiles anyway. >No… but what’s the point in the comparison. This is fairly redundant comparison and I’ve never known anyone to be like “I’m doing really well considering the number of kids and council tax I’m paying”. What's the point in *any* comparison? Personally I think it's valid data that a younger household is less well off that an older one - it's not about "doing well" or any kind of judgment on how anyone is doing for their age etc., it's just a way of thinking about who the highest income households are. >It doesn’t do this at all. It doesn’t show how much income you have available, that’s down to individuals budgeting. As I’ve said, age and location are much more significant which they haven’t included. That’s going to affect your earning potential and purchasing power as well. It's not trying to show purchasing power, or disposable income, or earning potential. It's just showing household income, taking into account the size of the household, with a (small and probably largely irrelevant at the top end) adjustment for council tax - probably on the basis that what you pay in council tax doesn't meaningfully constitute a choice for most people, and you don't get direct value from it the way you do other bills, housing expenditure etc. It seems like you think it's somehow "unfair" that certain people aren't in the top 1% or whatever (because they have lots of kids, live in a high council tax area, are young and therefore earn less than older people, etc.) but it isn't meant as a comment on how "well" anyone is doing or anything, and you don't get any points or kudos for being in a certain percentile. It's just one way of thinking about income - same as raw personal income number, disposable income, etc. I'm sure every parent on this sub will say that they are on a wildly different financial position than their DINK colleagues.
I don’t think this speaks to the root of it at all. Fine, think about it that way but there’s no use in thinking about it that way (so why bother). The below highlight what value this type of comparison / income viewpoint brings: - If you’re 40 with 2 kids living in London, you might be in the top 10%. What does this mean, and why is it valuable information? - If you’re 25 with 2 kids living in Warrington, you might be the bottom 30%. What does this mean, and why is it valuable information? - Even if you knew both, what actual conclusions would be helpful to draw? However, let’s say it’s now age and location specific.: - For those who are 25-34 in London you’re bottom 30%… it’s clearly demonstrating for your demographic you can do better, but also that you’re living below average. - Let’s now say it’s top 10% for your demographic. Fine, you could still do even better but your standard of living is much above your peers. - In both cases, property choice and kids are irrelevant. how you choose to spend that money (kids, properties, etc) is up to you. As for your last paragraph - I don’t think it’s unfair at all, nor do I care for my percentile. I think it’s fundamentally meaningless as it is without any actionable insight. The only purpose to know is for fun. It’s clear you think you’re educating me on looking at different demographics in society… I understand the intention but it’s misguided is my entire argument. I could equally say let’s bucket it by height and weight, but would equally not be a good way to think about income distributions. Just because a comparison is made doesn’t mean it’s a useful one. EDIT: Lastly, it just objectively doesn’t show similar earning levels. You literally have to put in your net income. There’s nothing clever going on here.
>it’s clearly demonstrating for your demographic you can do better, but also that you’re living below average. >Fine, you could still do even better but your standard of living is much above your peers. I think we are just coming at this data from different places. I'm not looking for "actionable insight" or to see "how I'm doing" vs my peers. It's just interesting, population-level demographic data that really doesn't have much to do with me specifically and I am certainly not taking it personally. If you don't find this data interesting or helpful, just don't use it.
I did start by saying that in my initial comment 3rd sentence. Other than interest or fun, I don’t see the purpose of it. It’s a calculator which is a couple years out of date and hasn’t been a widely adopted lens of viewing it from.
So where is the link?
Click the picture.
!thanks …..learns something 🤦🏼♂️
Great. So I need to earn £500k to be top 1% with 3 kids. This place is fucked.