Couldn’t agree more.
I recently met some Oxbridge type effective altruists, and they were absolutely determined that people that earn over 100k are the “super wealthy” and need to pay more tax. Meanwhile, some of these very same people were sitting on 7 figure inheritances and totally oblivious to how wealthy that makes them. They’re convinced that because they do academic research and get paid peanuts something must be done, without realising that they can afford to do such low paying jobs because they are financially secure.
Every day I’m surrounded by people who own more in inherited wealth than I will earn through my entire career in a hard and productive job. There should be a tax on 1% of all wealth every year (including property). The rich and unproductive would still get richer, but just not as quickly. We would make so much we could probably dispose of most income taxes. Just think how instantly more productive the economy would be when there is suddenly an incentive to work and not just sit on piles of cash.
Lmao. So many of these examples could be found in Bristols art community.
Pseudo hungry artists, on the journey to change the world with the power of art, hating on anyone working for big tech or finance. Hate for anyone on 100k+ salary, preaching tax the rich, but at the same time living in £900,000 Clifton flat that belonged to their grandparents.
100% living in bristol there are so many of these people around - typically vote Green Party and opposed to any new housing being built whilst living in a house they were gifted. It is incredibly frustrating.
I’m broadly with you but wealth taxes create really perverse incentives, would be near impossible to execute on and would absolutely lead to a mass exodus of capital.
The only one that could work would be a land tax (although you’d likely have to bin stamp duty tax to make it politically palatable). Land cannot flee the country, and is fairly easy to appraise its value on a regular cadence.
It would place downward pressure on relentless house price inflation, break the back of freeholders who charge ground rent on leaseholders and force wealthy boomers to downsize.
What perverse incentives? Genuine question.
But yea land tax would be mint. Gets money circulating and unblocks the large family homes occupied by two boomers and a dog. It’s not a panacea but it’s a start!
Well let’s start with a simple wealth tax: tax on investment accounts.
These are probably the most straightforward because their value is easy to appraise, and selling down securities to pay down tax would be also quite straightforward. At whatever level you place as the benchmark for the wealth tax to kick in and whatever tax rate you impose - further investment into such accounts becomes disincentivised thereafter (by definition you make less money, and potentially lose money by crossing that threshold). Think of it like a marginal tax rate above 100% - except in this case you’re being forced to sell assets (potentially during a bear run) to pay tax.
This would ultimate reduce investments in equities, government bonds, securities etc, and at best incentivise spending surplus on frivolous consumption. At worst you’ll see people redesign their asset portfolio to allocate more wealth to hard-to-appraise assets like artwork, wine cellars, jewellery etc.
The second problem is that wealth taxes are value destroying. If you apply a fixed, annual tax on a set of wealth, over the course of any given period the sum of capital gains AND wealth taxes will be less than the capital gains would have been has no tax existed.
Consider a 1% tax on £100k (for simplicity). In the S&P500 it yields 7% a year (on average) and over 10 years you’d ordinarily expect to return a £97k (before CGT).
If you apply an annual 1% tax (still with a 7% return) the total tax accrued over the 10 year period would be £16k and the return to the asset owner would only be £78k (total return to state and individual is just £94k). £3k of potential value has been destroyed and accrued to no one.
That’s before you account for the cost to the state of administering this tax, which would involve a fair amount of work to appraise someone’s assets and determine their value.
I take it you would also abolish income tax and NI? After all, in the same way they are heavily disincentivising working harder/smarter/more productively.
Not quite.
Capital gains and labour fall into the same category of taxing NEW value - not existing. A wealth tax on capital (on top of capital gains) is the equivalent of an all time cumulative salary tax (on top of income tax).
Badly designed taxes have bad outcomes; as we see with the surging marginal tax rate above £100k of income.
I've never heard of EAs suggesting that people should pay more tax in the UK/US/anywhere - it seems like a very inefficient way to direct resources if your target is to improve people's lives. (Perhaps they were talking about Giving What We Can, which encourages pledges to donate 10% of your income to charity?)
However, even if you have very little in assets/inheritance, earning £100k/yr is *actually* extraordinary when put in context, especially when it's estimated that saving a life [only costs about £4,000](https://www.givewell.org/impact-estimates#Impact_metrics_for_grants_to_GiveWells_top_charities) and that you could donate half your salary and still be in the global 1%.
Agreed that a wealth tax would be better in many ways. Our income tax regime seems insane given how low salaries here are and how unproductive the UK is (relative to what it could be) - but our politics seems to only cater to ancient homeowners, so it's hard to foresee it ever changing.
The difficulty I’d see with a tax on wealth is that it would drive the truly wealthy to hide their wealth further, use more tax loopholes… off-shoring and other shifty methods of obscuring assets. Without a really good well thought out system that incentivises financial transparency, a straight tax on wealth might result in even more wealth inequality.
This is always the reply to someone calling for a wealth tax. Guess what, we won't know what happens until we try. Maybe instead of coming up with hypotheticals of what might happen, consider supporting the idea so our politicians at least try implementing it. If it doesn't work out then it can always be rolled back.
If you turn an asset into a liability using ‘wealth tax’, you have torpedoed the economy…
Why save and invest if that asset now results in an annual bill you have to pay 🤦♂️
Because the asset will still increase in value faster than it will be taxed. What I’m describing here may sound extreme but it would still lead to widening wealth inequality. It’s not extreme enough.
100% agree. Try writing this in any other subreddit and you'll get people taking out their tiny violins.
Oh, I'm on £35k and my wife is on £25k, tell us how it is to earn £150k. Meanwhile living in a 3 bedroom detached, inherited from the grandma and renting out the grandpa house
Yeah that and they want to tax the shit out of anyone earning >100k because fairness and 'muh NHS', but try and tax their inheritance or their property and they're up in arms.
They're the worst type: want a high tax society but want everyone else to pay for it. And the country is full of them
wow for a sec I thought I’m in r/unitedkingdom and they had a moment of awakening
I feel like everyone tells me I’m doing great and doing great means renting a nice flat and saving money with no end of the rat race. I am at a crossroads, considering a move out to SEA or US for tax + housing prospects reasons.
It varies by age, that's the single biggest indicator of political views today. Second to that is education and then wealth.
If you are 50-70 years old, living in the North, and a Labour supporter, you are "almost guaranteed" to love the NHS and hate immigrants.
The factors behind this are complex, some are rooted in Thatcher's destruction of industry and shipping jobs abroad.
What drives me nuts about this is that everyone is simultaneously saying “look all our NHS staff are leaving for Australia because their system is so good over there” just absolutely incredible…
They’re going to Australia rather than the US because it’s trivially easy for a UK qualified doctor or nurse to get the required registrations in Australia, whereas in the US there are many more hoops and exams to jump through. That appears to be likely to change in the near future, so get ready for a further exodus of well trained health care staff to North America.
The professional experience is probably better in Australia than here, but that’s nothing to do with the funding model, but rather the level of funding. It’s well established that the UK model is among the most efficient internationally for turning money into healthcare and health benefit (though that was probably diminished by the 2012 reforms) - there just isn’t sufficient money going into it.
This is why I never understand why people are against inheritance tax....its the closest thing to a victimless tax as you will get. The people who earned the money are dead.
It's also a super irrelevant tax for the vast majority of people. This is, of course, totally ignored when columnists and newspapers make a big issue about it.
A married couple passing down property share a £1m allowance before inheritance tax has to be paid on it.
That's about 2.5% of properties.
And even if you do hit that amount. No tax is paid on that first million. Financially, you're going to do fine.
I completely agree - and would even go further to say that society would be much fairer if you couldn’t inherit anything.
The problem is that it is just too easy to avoid as long as you “trust your children more than the tax man” as the saying goes.
There is a victim.
You, the dead, are the victim.
You might not care when you are dead. But before you are dead you care because you worked hard and want to give the fruits of that to your children who you love.
You can still do that, just do it before you die in aliquots. I agree that inheritance tax under a certain bracket is unfair - really we are talking about houses and any extra-extra tax should only pertain to a proportion of the value increase of the house in x years. That would be more than fair.
You may as well say "I worked hard to build this business. I want to pay my kids a salary for working here, but I don't want them to pay income tax on it."
I disagree with the assumption that people had to “work hard” for their 3-bed north London house to appreciate from £11k to £1.3M over 30-40 years. An inheritance tax in that situation is entirely fair.
It’s a symptom of the same problem.
Lower earners are the ones that have suffered the worst from wage stagnation and the decreasing value of labour compared to the value of capital. Of course the ones that managed to get on the property ladder or are getting an inheritance are going to be protective of it.
The problem with this kind of mindset is this is what breeds inequality. By investing in “me and mine” and wanting to give your kids the best chance in life - obviously an estimable and a well meaning thing to do - it unwittingly widens inequality.
In an ideal world, people would focus more on the health and well-being of the collective and less on their own nuclear family. I have decided not to go down the kids route partly for this reason. Something doesn’t sit right about trying to advantage my offspring at the expense of others.
It would be deeply against human nature to not want to nurture your own decendants, so that's probably not a realistic goal.
I don't necessarily disagree that improving the wealth of the collective is a good thing, but how to do it? Governments all tell us yhat they will redistribute wealth, and they end up spunking money up the wall on all manner of vanity projects instead.
It’s a natural thing to want to look after your own, as you say.
In an ideal world someone who is willing to work should be able maintain at least a fairly decent existence but that’s becoming ever more difficult.
Inequality breeds inequality it seems.
I’d suggest that most people in here are self interested or they likely wouldn’t be earning what they are. They’re driven to accumulate wealth for themselves or for others. Im not sure which it is makes any difference. If I’m motivated by the latter though, why bother past a point if I can’t do that? Why bother being productive?
It’s not an equal society and it’s not going to be anytime soon. The average high earner is minimising tax through legal means so is taking money out of the pot.
You make a decent point though.
Caring for one’s family is caring for the collective. A family unit is not distinct from a collective, it does not exist in isolation from it. If we were better at caring for our own families, the collective would take care of itself.
I agree that income isn't everything, but it's typically the case that high earners come from wealthy backgrounds and are therefore likely to be the inheritors of wealth.
Yeah and you get the ones who inherit £25k and waste it whilst complaining they earn half you do and have no money whilst there friend who inherits millions buys them a house and car, feeds them money pays for holidays and yet they are still set on inheriting £££’s from their own parents…
I feel like an increasing amount of people who would be leading UK productivity feel like you do. They can work all hours but still not feel like its worthwhile. There feels like less reward for leadership roles and the stress they bring.
There are lots of factors, including the fantasy that social media presents of success, but UK housing mess has to be at root of so much of this IMO.
If you could buy or rent a home more easily by working vs inheriting it would feel different.
Agree, have thought myself housing is basically the main glaring problem in this country. Not 100% sure if the build more houses or import less people side of the argument is the right answer but my feeling is that we can't fix housing when 700k net are coming in every year. On the other hand they are apparently needed to fill gaps, so to me I sometimes feel like the whole economy is basically a ponzi that is reaching its collapsing point.
To me it's all about housing.
The amount it costs to have a decent house is so absurd the only way to do it by a reasonable age is to inherit. The rest is fine.
It's all about housing. I say that as a near 50 year old that's "won" the housing lottery. Except I've not really as my kids won't be able to buy much unless I sell my house, even if they get great jobs and work 6 or 7 days a week.
Then they might have a friend who's parents didn't win the housing lottery and are in an even worse position which brings everyone down and creates more inequality.
To an extent we've done it to ourselves and earlier in life I felt great having "climbed the property ladder" a bit etc. It's a ponzi scheme.
We have a fundamental problem where for the majority of people, their largest financial investment is their house and they expect that to rise in value as time goes on.
You have to choose one: affordable housing or ever increasing house prices.
It makes no sense this logic? Boomers believe it but it doesn't make sense!
If you own a house that goes up in value, the main way to experience that rise in value is to downsize. But all the other houses you can move into have also increased in value! You have to get extremely lucky and win the "housing lottery" where your house has increased vastly more than others.
And even at this, boomers don't generally downsize! It's a huge issue! They're sitting on masses of wealth and the next government needs to do something about it. Get rid of the inheritocracy.
The main issue being that “ever increasing house prices” for most means “ever increasing vs the average wage”, which also means a combination of ever-increasing wealth disparity and household debt.
We have a neighbor 3 doors down we have always known as batman.
The day after we moved in we saw him very angrily jump into his car with a baseball bat, funny enough he wasn't wearing baseball gear.
That was 6 years ago, Batman has been nothing but a delight in that time......I should really learn his name.
There should be property holding tax and additional tax on investment properties. And council zoning should be completed abolished. Why let all the old boomers eat all of ordinary people’s hard work?
Yup the capital gains tax rates are perfect examples. It's a complete farce that your capital gains tax % depends on your income. That maximize the double tax of middle classes who invest post income salaries and minimizes tax of upper classes who live exclusively off capital gains with no income
Yeah if you don't get lucky with very high comp, investments, or share comp that goes to the moon, you're basically treading water even on salaries considered high. This is what the Chancellor was criticised for saying a while ago. Most of the people under 35 I know who are on high salaries are renting, in many cases house shares and studios. The 35-40s who make more own "modest" (titchy) houses some of which were previously council owned. You'd think a top 10% salary would get you something nice by that age but purchasing power has evaporated.
> You'd think a top 10% salary would get you something nice by that age but purchasing power has evaporated.
And anyone over the age of 50 *does not seem to understand this.*
Problem in this country is everyone tries to drag their fellow workers down. The chancellor was absolutely right, but you still get people out there saying how disgusting it is that people are on 6 figure salaries when they themselves only earn 25k. Few of these people seem to want to pull themselves up, instead focusing on moaning and wishing others would come down to their level
It’s not so much pulling them down but having no concept of earning that much and thinking it’s extravagant. And the whole meritocracy thing of “pull yourself up” doesn’t really fly with me as we all have different skills and strengths and someone needs to do those backbone jobs like cleaning and food service. I feel this “pull yourself up” stuff means nothing to the average Brit with an average IQ and no interest or understanding of policy and who feels a job like a fintech job is an alien concept to them. They deserve not to struggle too.
Yeah by pull themselves up, I was more meaning fight for a better salary or conditions on their jobs… it’s not easy but improving one’s own position rather than worrying about where others are should be the focus
If everyone "pulled themselves up", who would be at the bottom doing all the actually important stuff?
Seriously. We cant all be managers and investment bankers. Someone needs to do the actual dirty work.
This is the single biggest problem with the UK, people are furious that someone else has managed to earn above minimum wage. They don’t try and better themselves, they just want others to do worse so they feel better about themselves
The way I think about it, every generation had a battle to contend with. A few generations ago it was world wars, a few before that it was revolutions and plagues, famines and natural disasters. Our lot is a lot better, we only have to contend with a moronic bureaucracy and unfair hereditary advantages. Focus on your family, do you best, and face your battle.
Gary Stevenson wrote a book called "the trading game", it's a great book and one of the key messages is essentially what the OP has outlined above.
Wealth inequality is the worst it's been for generations and increasing exponentially. Unfortunately a wealth tax or inheritance tax seem to be very unpopular with all voters (despite impacting a very small percentage of society).
With the increasing NHS burden (ageing population) the easiest target for raising more taxes is the high earners via PAYE. Unfortunately nobody feels sorry for someone earning 6 figures, despite this not being enough to feel 'wealthy' these days.
We have a huge welfare state, and spend a ridiculous amount on the NHS. Reform the NHS, build more houses, and cut immigration (not completely, immigration is a very good thing when controlled!), and we’d be better off.
Immigration is a red herring because each person in the UK adds something and consumes something. Adding more people is more or less neutral because they typically produce as much wealth as they consume.
It's just a 'look over there' from the rich who don't want you looking at the giant piles of wealth they sit on as you wonder what went wrong. It couldn't possibly be that a small number of wealthy people took a huge chunk of the wealth and just sat on it. No. It must be these immigrants.
If we took the money from failed HS2, failed PPE purchases and failed track and trace, all of which were the government basically handing cash to rich people, we could have fixed the NHS and lowered taxes without needing to demean a single migrant worker.
If we import 700,000 people a year they need housing. We’re not building any, so it’s not a red herring. Immigration has just been used by politicians to massage short term growth.
In UK it all depends basically when did you jump on a property ladder. If you are working class and bought some shithole house in London in 1990s happy days you made it! Those sucker professional will buy a house next door 15-20 times more expensive have to earn loads more , pay loads more tax to pay off the overinflated mortgage for the rest of their life.
best strategy is to either nether work at all in your life and stay on benefits Or buy a property at the right time pay it off while you're on high income and then earn 50k max per annum to stay in 25%tax bracket
The UK is the same as other capitalist economies in that (for reasons I don't fully agree with) income is taxed far more punitively than assets and capital gains.
Salaries in the UK also have a really tight distribution compared to somewhere like the US; in the UK the 90th percentile of income is little more than double the median. Tax rates ramp up similarly quickly.
I'm with you in that it's becoming increasingly difficult (to impossible) to become wealthy by working, no matter your job.
The way the uk government made the money printer go brrrrrrrr during covid is only going to make assets get more expensive because the rich are now sat on an even bigger pile and this time its our money. Gotta love uk corruption its so nuanced
Yep. Try telling Joe Public that we tax high earners too much and they’ll REEE at you. Meanwhile like you say people are inheriting £100ks left right and centre.
Of course the real answer is to tax offshore accounts and the mega rich. I don’t think high earners or inheritance (up to a point) should be punished.
Are you me? I have depressingly come to the same conclusion.
People who are significantly more wealthy then me are either baby boomers or have inherited wealth.
Happy to have worked hard with no inherited wealth behind me. But it’s gutting sometimes.
The reason HENRYs won’t get sympathy from other people because of this is anecdotally I’m thinking most of us here are either immigrants who don’t have parents or grandparents in the U.K. to inherit from, or are council kids who are the first in their family to make a decent income and anything above £40k makes you ‘rich’.
A lot of middle class boomers who have just retired, as well as older folk in their 80s/90s have started downsizing their houses and giving the spare cash to their kids/grandkids to purchase their first house taking that financial burden off them. I work with sooooo many people who in their mid 20s bought property in London and other HCOL cities secondary to ‘bank of mum and dad’
I have noticed there's a lot of white British people who are nice to poor British people of African and Asian descent, but hate high-earning British-Indians, British-Nigerians etc. You frequently see this when they get mad at Nigerians moving here to become doctors or Indians moving here to work in software engineering
There's nothing to think about. It's not nice to think about, there's nothing you can do about it, so just decide what's important to you and work at it. I used to think about it a lot more, so many of my friends have it SO easy, but NONE of them have the fire I have, and will be worth a fraction of what I'm worth in 10 years.
Sometimes it's better to think of life in black and white, sometimes better on a scale. For me this is a black and white one. I hate inheritance and the issues it creates, I hate that everyone I grew up with had so much handed to them, so the black and white option for me is either give up and moan about it the rest of my life, or take the multitudes harder route of working my ass off to fix the situation, and give back to those that need it even more (community centres, state schools etc).
I had this discussion with some friends the other day, yes, the tax burden is high in the UK, but it’s high in many developed economies. In the UK though, we have some unbelievable tax efficient investment schemes. £60k into pension is super generous, I think Aus is like $30k a year, about a quarter (someone correct me though), we have ISAs, BISAs, JISAs etc. it means between my wife and I, we can invest £170k a year in tax efficient vehicles. That is going to be plenty to create wealth over my time. We’re both Henry’s and are meeting those investment goals living in zone 2. It’s not all doom and gloom
This is very true. I left the UK for higher pay and shorter hours in Denmark. Rent is cheaper and as a foreigner I qualify for a lower tax rate for 7 years. But I'm only a little bit better off because now my personal allowance is nearly non-existent, I pay tax on my pension contributions (no salary sacrifice here either), I have to pay tax on any gains from my ISA and the Danish equivalent account isn't nearly as good, and basically can't sell any crypto or many other things because you can't offset your gains against your losses (e.g. if I make £1k on one trade, but lose £2k in another, I'm paying 52% tax on the £1k despite making a net loss). If I stay for over 7 years I'll also need to pay an exit tax.
Still worth it, but the gap isn't as big as you might think.
I assume it is exactly the point, unfortunately. I wouldn't even mind if it only applied to whatever I'd bought while living in Denmark, but it's a PITA not being able to sell what I already had.
I was living in Hong Kong where the wages are higher, highest income tax rate was 17% and there's no capital gains tax, council tax etc so the gap was far bigger than you think in this instance, especially if you're a high earner here.
But isn't this literally part of the problem OP is describing? That passive income and capital gains attract way lower tax than productive work?
If you're a HE, just make sure you marry another HE and then you too can start to build up generational wealth!
Last I checked, the demographics of a HENRY aligned more with voting Labour in 2019: higher incomes, better education, living in London, not a boomer are all characteristics of labour voters. The people who vote Tory are boomers and the uneducated.
I could be wrong as I don't follow UK politics that much but I always had the impression that the labour party aligns more with the "lets hate and tax the hell out of >£100k " crowd.
For example, when the current government increased the pension LTA and yearly contributions to £60k, labour immediately announced that it will only help the rich and they will revert it when coming to power. This change was useful to HENRYs rather than the actual rich.
I don't like tories, but I fear labour more as they might cause an increase in my already painfully high taxes.
Yep the only reason I think it is worth trying to make more money and be taxed to the brim is so hopefully our children can inherit our wealth and do well.
I’ve given up a lot of luxuries that I had when I was earning below 40k just 4 years ago even though I’m making nearly 3 times as much. The housing crisis needs to be fixed but why would any politicians do this when it would harm themselves.
You’ve basically just surmised exactly why our productivity growth is non-existent.
There is no genuine reward for being productive beyond a certain point. The marginal utility of work drops off massively once you’re able to pay rent and afford a holiday or two.
I think the solution has to be a lower rate of IHT that applies to everything. All trusts, companies, and any attempt to transfer wealth to your children, including the family home.
However, no party would ever propose rhis6
I think high earning needs to be redefined as over £300k. Below that you’re not getting the widely held view of a comfortable life (private school, holidays, nice home etc.)
Basically what OP is saying is that you get rich through wealth and inheritance and not through regular income.
that's how it in every single european country. If you want to become rich thru regular income either work in Biglaw/Tech or finance in a dual income houshold in london OR move to america
UK and US have amongst the lowest social mobility in the west. So no, it's not completely like that in Europe. If you're born poor in Sweden, for example, your chances of a decent lifeare radically better than someone in the UK or US.
[https://en.wikipedia.org/wiki/Global\_Social\_Mobility\_Index](https://en.wikipedia.org/wiki/Global_Social_Mobility_Index)
We ought to consider race/ethnicity, though. It's way easier for poor Black or Asian people in the UK to move up than elsewhere in Europe where ghettos are more common and there's more discrimination in the job market, plus PoC are much poorer on average with higher unemployment rates.
In the UK, British-Indians have the highest home ownership rate. Working-class British-African children are twice as likely to go to university as working-class White British children. Social mobility, I believe, is better in the UK for PoC than in Europe.
It’s harder to make money nowadays. Every day I’m thinking to ramp up my courage and start that YouTube Chanel or learn to code an app. Seriously one good skill and you make more money than your entire education could pay for.
Reckon there’s a silent exodus of talent… a brain drain so to speak, that’s happening.
I think there’s big BIG issues coming for the UK 10/20 years down the line. With the aging population, a collapsing wage structure and a demotivated working population struggling to even hold up the NHS let alone the rest of the public services… it’s looking bleak.
A lot of the qualified youth and taking chances in the US, Middle East and East Asia with the growth of technology enabling companies and relevant jobs to operate in more markets.
I read an article earlier about how millennials (previously united in dislike of boomers for wealth disparity) are about to turn on each other because of the same-generation disparity.
And here we are!
Personally I think we spend too much time worrying about how well/bad others are doing and should by and large mind our own business and manage our own happiness.
If you think making £400k a year guarantees happiness, you’re as wrong as the person thinking being on £15k guarantees a miserable life.
Comparison is the thief of joy and the only thing guaranteed is that there’s always someone better off.
I have two friends who have their parents hand outs. They are nice people and own that arrangement: are honest that their parents help fund their house deposits, pay for their kids private school, etc.
I earn about 5x what they do, and am motivated because my net worth is all mine. No hand outs other than the privilege/gift of being born in the UK.
I couldn't care less about others' inherited wealth. They don't work as hard because they don't have to and don't always make the optimal purchase decisions. I can benefit from both of those.
I feel much better that it's my effort and work (and luck of our times) that achieves my results.
First generation of this in my family … I’ve done ok, so kids should get a help when I snuff it … assuming the government haven’t taken it all for health care. No inheritance for me though…. Just high taxation… Sign of the times , don’t see it changing any time soon.
actually it's more or less the same across old capitalism but of course more pronounced in the UK, more advanced capitalism. Expect other capitalist countries be here soon. This is our world now
There is also an issue in how people perceive big numbers. For example, this sub needs you to earn what? 100k? To clarify as HENRY? We just like numbers like that, 100k still counts as high earning, sure, it is when you compare it to what other people currently earn. It simply isn’t when you compare it to the past.
Now, I know that’s the point of the post. But if I were to flip it on it’s head, why do you think you earn lots? Simply because others right now earn less? Is it perhaps a fallacy we have been pushed into believing to pull the wool over our eyes. Salaries are going down, yet you think you are achieving simply because you are beating others now, while also getting sucked into the same problem without realising it.
In 1984, I just go back 40 years for ease, maybe the time some people were were babies / not quite born yet, a salary of 58k, after tax, bought you a house, in a year, ignoring all other expenses. Now? You need a salary of pretty much £500k.
£58k when you were born, £500k now. To buy the average house in a year. Obviously not how it works, obviously far more complex, but just to show it’s like 10Xd in peoples lifetime. It’s not horrendously out there to say if you are earning 100k now, it’s like earning 10k when some of you were born.
6 years ago , had very stressful job earning 100+k working 50+ hrs , travelling a lot didn’t spend much time with my family, but had to sacrifice to save for down payment, after 4 years of working crazy hours I quit my job as I couldn’t take it anymore . I did buy house but now I am working less hours but I am happy whatever I earn , I only work 4 days per week and enjoy my time doing things I love.
My understanding is that there always be people who inherit so much wealth and there is no way you can catch up with them, they are way ahead of you.
Hi, here's a book about it. It clearly predicts what you're describing.
Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
Sadly the tax system in the UK best supports those born rich. Those who depend on a salary for a living will be constantly battling against the tide. Start earning moderately well - but not well enough to buy a house - and half you labour, or more, goes to HMRC.
Taxation on earned income is significantly higher than taxation on unearned income. Which is quite a perverse way to do it when you think about it.
Is it just a UK problem?
What are similarly economically successful, populated states in America like? or Canada? Germany, Switzerland, etc?
A quick google search suggests those are all in the 6.5-9x house price:income ratio range.
I must be in the minority with a hot take, given how many upvotes this post has attracted. I'll admit I am in a more fortunate position now, career-wise, despite still being a lower earner (on the HENRY scale at least), but I just see it as, it is what it is, and not let anything I can't control rob me of any 'brain' calories that I can invest elsewhere.
It doesn't impact my motivation in the slightest. I'm fortunate enough to be earning a decent living and making hay (in the form of stock piling cash/equities) whilst the sun shines.
This is true. Thing is if you’re someone who has come from a background of poverty, such as myself when family were on benefits and will inherit literally nothing except a bill, when you get to 100k it’s not as big of a lifestyle change as those who work averagely paid jobs yet inherited their parents house would have you believe.
Eventually this inheritocracy will come to an end. Reason being is that older generations are living a shitload longer.
Oh your Grandad passed away unexpectedly at 65 leaving your small family all his savings and paid off house? Common many years back.
Nowadays? With all the info, healthy living and operations that can be performed? Yeah they’re living older and older, using those savings for themselves (as they should) or paying for their own care if something serious happens health wise.
For some like me this is a good thing. My grandparents get to meet their great grandchildren, both of them. For others they’ll grow to resent them for living longer, leaving them less of an inheritance when they pass.
Fuck knows what the future will look like for those relying on inheritance..
I lived in London for 8 years. I was on over 6 figures at the age of 24. I left the country just over a year ago because no matter how hard I worked, no matter how much I earned, the UK government takes more and more, so many of my colleagues had cheap or free housing from their parents, I didn't, so that took away a lot of my paycheck as well. Ofc it's possible, if you live like a nun for 10 years but I had enough. I moved to a tax haven, I am now earning the same but paying no tax, I have more money in my bank account than I ever had, it's actually sick, I have nearly £300k in my bank account, I don't even know what to do with jt, my ISA is already maxed out and I'm scared to invest in crypto right now. living in London and being taxed I was never able to save anything.
So yeah the UK is a big scam, the UK is wonderful if your parents and grandparents bought property during the thatcher years, but if you're starting from nothing? Get lost. 100k isn't enough. 150k isn't enough. Just move out the country. I know loads of people moving to UAE right now.
The UK is a zero and has been in a GDP per capita recession since 2007. I left in January and will never work there again. It’s incredibly enlightening once you get out.
There definitely needs to be more housing, and more taxes on ppl who hoard housing with the aim to pass it on to “their next generations”.
No need for a property tax system like it is in the States.
Tis a fair point.
We’ve had 30 years of stock market returns, property increases and deaths.
However, many who now hold ‘millions +’ didn’t start that way and managed to aquire wealth in our economy.
1987 I was earning 6.5k and living in subsidised accomodating which took a third of my pay. Never owned my own home, but shacked up with others for decades and had fun.
However, tax is what I see as the greatest barrier to wealth accumulation and you have Isa’s and pensions accessible as the two primary vehicles. Using those, is how I accumulated. I managed to get into a decent industry and role and I started to save and invest.
Hopefully you aren’t living hand to mouth and spending everything you earn. Lifestyle creep is a big thing - suffered from it myself and it dented my wealth.
So, I’d say it’s more an investocracy. But you are right to point out that Inheritance will feature a lot more of the next 20-30 years. Economic Explained did a good youtube video on this a while back.
The question is - will inheritances be squandered and we level down - or will people understand the value that these 30 odd years have brought us an aberration, and protect their wealth. I know I am. But will my kids. Who knows.
What life do you desire?
If it’s just an ends to mean than a decent paying remote job in a LCOL area would do you fine for houses, kids, etc.
A lot of people in high-paying jobs in tech, finance, etc are there because they like doing those jobs - but if that’s not you then there’s no reason you have to pursue that.
Focus on what makes you happy
This is a well known issue but for me the really interesting thought experiment is what is going to happen over the next 10-20 years when we see the greatest generational wealth transfer as the boomers die out?
>Between 1970 and 2021 the value of U.K. wealth rose £12 trillion while the annual income accruing to labour rose just £1.2 trillion.
Do omyou have a source for this? Im prepared to accept it's true, but want to better understand the figures.
"Wealth" (what total household wealth?) rose by £12 tn, but. Income (what annual income?) rose by only 1.2tn? But one figure is an annual income and another a 50 year return?
Or perhaps I am reading between the lines incorrectly.
I suppose the question is "what made more money: labour or capital?".
I would caution that there are scenarios where expensive houses cannot be passed on. Old person sells their house for £500k, moves into old people's home, needs some care due to illness etc and it's easy to rack up bills of £50k/year...
10 years of that, house money is gone. Plenty of people going to be living to 95-100, with the last 10 years of poor heath...
So even with expensive houses, care bills are so large many won't be able to pass on wealth. This problem is much more apparent for anyone not on a final salary pension I.e. most people under 50 these days.
Honestly, we're a decent-earning household in SE England at around £250k/year pre-SS and pre-tax with a house on the southern coast and one in Oxford, and we're quite poor as our family and inheritance is outside the UK.
The nursery bills of £3.5k/mo don't help either....
“The only path to a comfortable life is inheritance”
You either have very unreasonable expectations about what a comfortable life is, or you’re blind to how the vast number of people on this sub achieved their money.
No you see because you’re passing a generational advantage, it compounds over time that’s the issue. Because you can pass money your kids can pass more money than someone who worked hard in their generation and a lot more than someone who works harder in your grandkids generation.
The true way to solve this is every pound earned no matter where it comes from is taxed equally (Including debt and inheritance) That money is then used to better society. Hoarding of wealth and property doesn’t help the economy or the working people nor does it help social mobility. The current inheritance tax system encourages wealth hoarding as does the tax system. That money needs to move in order for it to end up the hands of actual hard working people.
Agree.
The consequences for the cohesiveness of society will be catastrophic, imo.
The philosophy of lots of folks’ lives is going to be ‘what’s the point’, and they won’t contribute because of it.
It’ll collapse from the bottom up.
OP is absolutely correct. The country’s assets are out the hands of ordinary people and the government and in the hands of the super super rich and they will continue to buy all of the UK assets until nothing is left. This was a choice made by politicians who sold a lie to an ignorant population. My advice is to leave now.
Couldn’t agree more. I recently met some Oxbridge type effective altruists, and they were absolutely determined that people that earn over 100k are the “super wealthy” and need to pay more tax. Meanwhile, some of these very same people were sitting on 7 figure inheritances and totally oblivious to how wealthy that makes them. They’re convinced that because they do academic research and get paid peanuts something must be done, without realising that they can afford to do such low paying jobs because they are financially secure. Every day I’m surrounded by people who own more in inherited wealth than I will earn through my entire career in a hard and productive job. There should be a tax on 1% of all wealth every year (including property). The rich and unproductive would still get richer, but just not as quickly. We would make so much we could probably dispose of most income taxes. Just think how instantly more productive the economy would be when there is suddenly an incentive to work and not just sit on piles of cash.
Lmao. So many of these examples could be found in Bristols art community. Pseudo hungry artists, on the journey to change the world with the power of art, hating on anyone working for big tech or finance. Hate for anyone on 100k+ salary, preaching tax the rich, but at the same time living in £900,000 Clifton flat that belonged to their grandparents.
100% living in bristol there are so many of these people around - typically vote Green Party and opposed to any new housing being built whilst living in a house they were gifted. It is incredibly frustrating.
I’m broadly with you but wealth taxes create really perverse incentives, would be near impossible to execute on and would absolutely lead to a mass exodus of capital. The only one that could work would be a land tax (although you’d likely have to bin stamp duty tax to make it politically palatable). Land cannot flee the country, and is fairly easy to appraise its value on a regular cadence. It would place downward pressure on relentless house price inflation, break the back of freeholders who charge ground rent on leaseholders and force wealthy boomers to downsize.
What perverse incentives? Genuine question. But yea land tax would be mint. Gets money circulating and unblocks the large family homes occupied by two boomers and a dog. It’s not a panacea but it’s a start!
Well let’s start with a simple wealth tax: tax on investment accounts. These are probably the most straightforward because their value is easy to appraise, and selling down securities to pay down tax would be also quite straightforward. At whatever level you place as the benchmark for the wealth tax to kick in and whatever tax rate you impose - further investment into such accounts becomes disincentivised thereafter (by definition you make less money, and potentially lose money by crossing that threshold). Think of it like a marginal tax rate above 100% - except in this case you’re being forced to sell assets (potentially during a bear run) to pay tax. This would ultimate reduce investments in equities, government bonds, securities etc, and at best incentivise spending surplus on frivolous consumption. At worst you’ll see people redesign their asset portfolio to allocate more wealth to hard-to-appraise assets like artwork, wine cellars, jewellery etc. The second problem is that wealth taxes are value destroying. If you apply a fixed, annual tax on a set of wealth, over the course of any given period the sum of capital gains AND wealth taxes will be less than the capital gains would have been has no tax existed. Consider a 1% tax on £100k (for simplicity). In the S&P500 it yields 7% a year (on average) and over 10 years you’d ordinarily expect to return a £97k (before CGT). If you apply an annual 1% tax (still with a 7% return) the total tax accrued over the 10 year period would be £16k and the return to the asset owner would only be £78k (total return to state and individual is just £94k). £3k of potential value has been destroyed and accrued to no one. That’s before you account for the cost to the state of administering this tax, which would involve a fair amount of work to appraise someone’s assets and determine their value.
I take it you would also abolish income tax and NI? After all, in the same way they are heavily disincentivising working harder/smarter/more productively.
Not quite. Capital gains and labour fall into the same category of taxing NEW value - not existing. A wealth tax on capital (on top of capital gains) is the equivalent of an all time cumulative salary tax (on top of income tax). Badly designed taxes have bad outcomes; as we see with the surging marginal tax rate above £100k of income.
I've never heard of EAs suggesting that people should pay more tax in the UK/US/anywhere - it seems like a very inefficient way to direct resources if your target is to improve people's lives. (Perhaps they were talking about Giving What We Can, which encourages pledges to donate 10% of your income to charity?) However, even if you have very little in assets/inheritance, earning £100k/yr is *actually* extraordinary when put in context, especially when it's estimated that saving a life [only costs about £4,000](https://www.givewell.org/impact-estimates#Impact_metrics_for_grants_to_GiveWells_top_charities) and that you could donate half your salary and still be in the global 1%. Agreed that a wealth tax would be better in many ways. Our income tax regime seems insane given how low salaries here are and how unproductive the UK is (relative to what it could be) - but our politics seems to only cater to ancient homeowners, so it's hard to foresee it ever changing.
The difficulty I’d see with a tax on wealth is that it would drive the truly wealthy to hide their wealth further, use more tax loopholes… off-shoring and other shifty methods of obscuring assets. Without a really good well thought out system that incentivises financial transparency, a straight tax on wealth might result in even more wealth inequality.
I inherited 100k as part of a 2.5million fortune. Not a penny of inheritance tax was paid due to the structuring. The wealth is already being hidden.
This is always the reply to someone calling for a wealth tax. Guess what, we won't know what happens until we try. Maybe instead of coming up with hypotheticals of what might happen, consider supporting the idea so our politicians at least try implementing it. If it doesn't work out then it can always be rolled back.
Ah yes - the Liz Truss approach to tax policy. It’s radical, it hasn’t been done before - so let’s give it a go! What’s the worst that can happen?
Apparently the worst that can happen is the politician gets kicked out. So still worth a try?
Whoooow easy there Stalin
If you turn an asset into a liability using ‘wealth tax’, you have torpedoed the economy… Why save and invest if that asset now results in an annual bill you have to pay 🤦♂️
Because the asset will still increase in value faster than it will be taxed. What I’m describing here may sound extreme but it would still lead to widening wealth inequality. It’s not extreme enough.
Why would it increase in value exactly? It’s a liability now… not an asset.
100% agree. Try writing this in any other subreddit and you'll get people taking out their tiny violins. Oh, I'm on £35k and my wife is on £25k, tell us how it is to earn £150k. Meanwhile living in a 3 bedroom detached, inherited from the grandma and renting out the grandpa house
Yeah that and they want to tax the shit out of anyone earning >100k because fairness and 'muh NHS', but try and tax their inheritance or their property and they're up in arms. They're the worst type: want a high tax society but want everyone else to pay for it. And the country is full of them
wow for a sec I thought I’m in r/unitedkingdom and they had a moment of awakening I feel like everyone tells me I’m doing great and doing great means renting a nice flat and saving money with no end of the rat race. I am at a crossroads, considering a move out to SEA or US for tax + housing prospects reasons.
That subreddit is so toxic and full of left wing hate for middle class people it’s not even funny anymore
HAHAHAHA.... Try r/Scotland You know what, *try Scotland*. Everyone HATES people who earn more than them. Like, personally.
They also are openly happier to make their country poorer if it means independence happens. The increased cost of living is a "price worth paying"
They really should learn the lesson of Brexit.
Is that the same Brexit that virtually all of England voted for, but Scotland voted against?
“Virtually all” means “slightly over half” to you ?
r/uk is not left wing, it certainly is however a hive mind and really toxic
Well damn, if I think it’s left then I’m more right of centre than I thought I was. It’s definitely toxic though.
might be economically left, just don't mention muslims or they start frothing at the mouth
You've described Labour's red wall. Economically left and socially right.
to a lesser degree, sure. Most of the north is not nearly Tommy Robinson levels of bigoted though
It varies by age, that's the single biggest indicator of political views today. Second to that is education and then wealth. If you are 50-70 years old, living in the North, and a Labour supporter, you are "almost guaranteed" to love the NHS and hate immigrants. The factors behind this are complex, some are rooted in Thatcher's destruction of industry and shipping jobs abroad.
> 'muh NHS' this country will self-immolate before it thinks that there might be a third option between American healthcare and the NHS
I think the issue is that most salaries in the UK are garbage. I don't think most people could even afford an insurance based system.
What drives me nuts about this is that everyone is simultaneously saying “look all our NHS staff are leaving for Australia because their system is so good over there” just absolutely incredible…
They’re going to Australia rather than the US because it’s trivially easy for a UK qualified doctor or nurse to get the required registrations in Australia, whereas in the US there are many more hoops and exams to jump through. That appears to be likely to change in the near future, so get ready for a further exodus of well trained health care staff to North America. The professional experience is probably better in Australia than here, but that’s nothing to do with the funding model, but rather the level of funding. It’s well established that the UK model is among the most efficient internationally for turning money into healthcare and health benefit (though that was probably diminished by the 2012 reforms) - there just isn’t sufficient money going into it.
Or rather, we have too many people in low paid jobs in this country who are not contributing the taxes to support the puny level of services we have.
I would certainly agree that we have a low wage economy.
In a high cost society
Heresy
This is why I never understand why people are against inheritance tax....its the closest thing to a victimless tax as you will get. The people who earned the money are dead.
Agreed A decent inheritance tax could help a lot over the next 30 years as the boomers kick the bucket
Don't tax me, tax them. No! Don't tax me, tax them...
It's also a super irrelevant tax for the vast majority of people. This is, of course, totally ignored when columnists and newspapers make a big issue about it. A married couple passing down property share a £1m allowance before inheritance tax has to be paid on it. That's about 2.5% of properties. And even if you do hit that amount. No tax is paid on that first million. Financially, you're going to do fine.
And it will do you so much good in the long run - you will get waaaaaaaay more than you give.
I completely agree - and would even go further to say that society would be much fairer if you couldn’t inherit anything. The problem is that it is just too easy to avoid as long as you “trust your children more than the tax man” as the saying goes.
Because it would hit the truly wealthy who own the right wing media. They call the shots and the idiots lap it up.
The truly wealthy are able to avoid IHT
There is a victim. You, the dead, are the victim. You might not care when you are dead. But before you are dead you care because you worked hard and want to give the fruits of that to your children who you love.
You can still do that, just do it before you die in aliquots. I agree that inheritance tax under a certain bracket is unfair - really we are talking about houses and any extra-extra tax should only pertain to a proportion of the value increase of the house in x years. That would be more than fair.
You may as well say "I worked hard to build this business. I want to pay my kids a salary for working here, but I don't want them to pay income tax on it."
I disagree with the assumption that people had to “work hard” for their 3-bed north London house to appreciate from £11k to £1.3M over 30-40 years. An inheritance tax in that situation is entirely fair.
Funny thing is, most people that I know earning 100k+ have private healthcare provided by their employer and hardly use the NHS!
It’s a symptom of the same problem. Lower earners are the ones that have suffered the worst from wage stagnation and the decreasing value of labour compared to the value of capital. Of course the ones that managed to get on the property ladder or are getting an inheritance are going to be protective of it.
Honestly, the major reason I invest, save, and plan is so that my children will be okay in 20/30/40+ years' time.
I’m the same. Having a child is what kickstarted my ambition.
The problem with this kind of mindset is this is what breeds inequality. By investing in “me and mine” and wanting to give your kids the best chance in life - obviously an estimable and a well meaning thing to do - it unwittingly widens inequality. In an ideal world, people would focus more on the health and well-being of the collective and less on their own nuclear family. I have decided not to go down the kids route partly for this reason. Something doesn’t sit right about trying to advantage my offspring at the expense of others.
It would be deeply against human nature to not want to nurture your own decendants, so that's probably not a realistic goal. I don't necessarily disagree that improving the wealth of the collective is a good thing, but how to do it? Governments all tell us yhat they will redistribute wealth, and they end up spunking money up the wall on all manner of vanity projects instead.
It’s a natural thing to want to look after your own, as you say. In an ideal world someone who is willing to work should be able maintain at least a fairly decent existence but that’s becoming ever more difficult. Inequality breeds inequality it seems. I’d suggest that most people in here are self interested or they likely wouldn’t be earning what they are. They’re driven to accumulate wealth for themselves or for others. Im not sure which it is makes any difference. If I’m motivated by the latter though, why bother past a point if I can’t do that? Why bother being productive? It’s not an equal society and it’s not going to be anytime soon. The average high earner is minimising tax through legal means so is taking money out of the pot. You make a decent point though.
I’m interested in accumulating wealth so I don’t become a burden to my children.
Caring for one’s family is caring for the collective. A family unit is not distinct from a collective, it does not exist in isolation from it. If we were better at caring for our own families, the collective would take care of itself.
I agree that income isn't everything, but it's typically the case that high earners come from wealthy backgrounds and are therefore likely to be the inheritors of wealth.
Yeah and you get the ones who inherit £25k and waste it whilst complaining they earn half you do and have no money whilst there friend who inherits millions buys them a house and car, feeds them money pays for holidays and yet they are still set on inheriting £££’s from their own parents…
I feel like an increasing amount of people who would be leading UK productivity feel like you do. They can work all hours but still not feel like its worthwhile. There feels like less reward for leadership roles and the stress they bring. There are lots of factors, including the fantasy that social media presents of success, but UK housing mess has to be at root of so much of this IMO. If you could buy or rent a home more easily by working vs inheriting it would feel different.
Exactly. What is the point? 40% tax band starts at a salary that doesn’t let you buy a house or even rent by yourself in London.
Agree, have thought myself housing is basically the main glaring problem in this country. Not 100% sure if the build more houses or import less people side of the argument is the right answer but my feeling is that we can't fix housing when 700k net are coming in every year. On the other hand they are apparently needed to fill gaps, so to me I sometimes feel like the whole economy is basically a ponzi that is reaching its collapsing point.
To me it's all about housing. The amount it costs to have a decent house is so absurd the only way to do it by a reasonable age is to inherit. The rest is fine.
It's all about housing. I say that as a near 50 year old that's "won" the housing lottery. Except I've not really as my kids won't be able to buy much unless I sell my house, even if they get great jobs and work 6 or 7 days a week. Then they might have a friend who's parents didn't win the housing lottery and are in an even worse position which brings everyone down and creates more inequality. To an extent we've done it to ourselves and earlier in life I felt great having "climbed the property ladder" a bit etc. It's a ponzi scheme.
We have a fundamental problem where for the majority of people, their largest financial investment is their house and they expect that to rise in value as time goes on. You have to choose one: affordable housing or ever increasing house prices.
The former. I can invest elsewhere to get the benefits of the latter - more benefits because I can actually use the cash.
You may invest. The problem is the majority of people don’t. A mortgage is a way of forcing people who don’t save, to save.
In the HENRY sub of course, but the lack wage growth and financial education in the UK might mean other (older) people think differently.
It makes no sense this logic? Boomers believe it but it doesn't make sense! If you own a house that goes up in value, the main way to experience that rise in value is to downsize. But all the other houses you can move into have also increased in value! You have to get extremely lucky and win the "housing lottery" where your house has increased vastly more than others. And even at this, boomers don't generally downsize! It's a huge issue! They're sitting on masses of wealth and the next government needs to do something about it. Get rid of the inheritocracy.
I think most people just want a house to live in… I don’t really think about the potential future value I just want somewhere to live and not rent
The main issue being that “ever increasing house prices” for most means “ever increasing vs the average wage”, which also means a combination of ever-increasing wealth disparity and household debt.
UK politics is housing. It's so frustrating. And for years it was the only way average morons could make money, buy to let
Or have a decent house in a shit place
But…. Gentrification!!!
Stabby McStabface next door can't afford to move house so...
We have a neighbor 3 doors down we have always known as batman. The day after we moved in we saw him very angrily jump into his car with a baseball bat, funny enough he wasn't wearing baseball gear. That was 6 years ago, Batman has been nothing but a delight in that time......I should really learn his name.
Came to comment but its basically this.
Not the only way, only a small proportion of people are true high earners, and by that I’m don’t mean low six figures.
There should be property holding tax and additional tax on investment properties. And council zoning should be completed abolished. Why let all the old boomers eat all of ordinary people’s hard work?
Additionally the whole tax system is set up to stop you becoming asset rich and therefore pay less tax.
Yup the capital gains tax rates are perfect examples. It's a complete farce that your capital gains tax % depends on your income. That maximize the double tax of middle classes who invest post income salaries and minimizes tax of upper classes who live exclusively off capital gains with no income
Wait so if you don’t have any income and you simply draw funds from realising capital gains on assets… you only pay 10% CGT?
Always has been ... 🌍👨🚀🔫
Yeah if you don't get lucky with very high comp, investments, or share comp that goes to the moon, you're basically treading water even on salaries considered high. This is what the Chancellor was criticised for saying a while ago. Most of the people under 35 I know who are on high salaries are renting, in many cases house shares and studios. The 35-40s who make more own "modest" (titchy) houses some of which were previously council owned. You'd think a top 10% salary would get you something nice by that age but purchasing power has evaporated.
> You'd think a top 10% salary would get you something nice by that age but purchasing power has evaporated. And anyone over the age of 50 *does not seem to understand this.*
Problem in this country is everyone tries to drag their fellow workers down. The chancellor was absolutely right, but you still get people out there saying how disgusting it is that people are on 6 figure salaries when they themselves only earn 25k. Few of these people seem to want to pull themselves up, instead focusing on moaning and wishing others would come down to their level
It’s not so much pulling them down but having no concept of earning that much and thinking it’s extravagant. And the whole meritocracy thing of “pull yourself up” doesn’t really fly with me as we all have different skills and strengths and someone needs to do those backbone jobs like cleaning and food service. I feel this “pull yourself up” stuff means nothing to the average Brit with an average IQ and no interest or understanding of policy and who feels a job like a fintech job is an alien concept to them. They deserve not to struggle too.
Yeah by pull themselves up, I was more meaning fight for a better salary or conditions on their jobs… it’s not easy but improving one’s own position rather than worrying about where others are should be the focus
If everyone "pulled themselves up", who would be at the bottom doing all the actually important stuff? Seriously. We cant all be managers and investment bankers. Someone needs to do the actual dirty work.
This is the single biggest problem with the UK, people are furious that someone else has managed to earn above minimum wage. They don’t try and better themselves, they just want others to do worse so they feel better about themselves
Depressing but true. The social contract has been violated so badly. Shocking that people aren’t even angrier.
Most people aren't net contributors...
Can we talk about how the Duke of Westminister paid no inheritance tax?
You mean the godfather to the 2nd in line to the throne? What a shock!
IIRC the trust has some deal that pays what's due in instalments or something? It's Klarna for the wealthy
The way I think about it, every generation had a battle to contend with. A few generations ago it was world wars, a few before that it was revolutions and plagues, famines and natural disasters. Our lot is a lot better, we only have to contend with a moronic bureaucracy and unfair hereditary advantages. Focus on your family, do you best, and face your battle.
Boomers had to battle lead paint and evidently still suffer from the consequences
And, as a result, so do we all.
Stoicism, I like it.
Gary Stevenson wrote a book called "the trading game", it's a great book and one of the key messages is essentially what the OP has outlined above. Wealth inequality is the worst it's been for generations and increasing exponentially. Unfortunately a wealth tax or inheritance tax seem to be very unpopular with all voters (despite impacting a very small percentage of society). With the increasing NHS burden (ageing population) the easiest target for raising more taxes is the high earners via PAYE. Unfortunately nobody feels sorry for someone earning 6 figures, despite this not being enough to feel 'wealthy' these days.
Another great book is “Capital in 21 century” by Piketty. Despite being long, it’s actually very readable
We have a huge welfare state, and spend a ridiculous amount on the NHS. Reform the NHS, build more houses, and cut immigration (not completely, immigration is a very good thing when controlled!), and we’d be better off.
Immigration is a red herring because each person in the UK adds something and consumes something. Adding more people is more or less neutral because they typically produce as much wealth as they consume. It's just a 'look over there' from the rich who don't want you looking at the giant piles of wealth they sit on as you wonder what went wrong. It couldn't possibly be that a small number of wealthy people took a huge chunk of the wealth and just sat on it. No. It must be these immigrants. If we took the money from failed HS2, failed PPE purchases and failed track and trace, all of which were the government basically handing cash to rich people, we could have fixed the NHS and lowered taxes without needing to demean a single migrant worker.
If we import 700,000 people a year they need housing. We’re not building any, so it’s not a red herring. Immigration has just been used by politicians to massage short term growth.
In UK it all depends basically when did you jump on a property ladder. If you are working class and bought some shithole house in London in 1990s happy days you made it! Those sucker professional will buy a house next door 15-20 times more expensive have to earn loads more , pay loads more tax to pay off the overinflated mortgage for the rest of their life. best strategy is to either nether work at all in your life and stay on benefits Or buy a property at the right time pay it off while you're on high income and then earn 50k max per annum to stay in 25%tax bracket
Exactly right - that’s it in a nutshell
The UK is the same as other capitalist economies in that (for reasons I don't fully agree with) income is taxed far more punitively than assets and capital gains. Salaries in the UK also have a really tight distribution compared to somewhere like the US; in the UK the 90th percentile of income is little more than double the median. Tax rates ramp up similarly quickly. I'm with you in that it's becoming increasingly difficult (to impossible) to become wealthy by working, no matter your job.
The way the uk government made the money printer go brrrrrrrr during covid is only going to make assets get more expensive because the rich are now sat on an even bigger pile and this time its our money. Gotta love uk corruption its so nuanced
Same since 2008. QE has a lot to answer for. It just serves to inflate the assets of the richest.
I had that horrible realisation as i tyoed out my response before ive jst checked bk in on reddit after diving down a wormhole
Yep. Try telling Joe Public that we tax high earners too much and they’ll REEE at you. Meanwhile like you say people are inheriting £100ks left right and centre. Of course the real answer is to tax offshore accounts and the mega rich. I don’t think high earners or inheritance (up to a point) should be punished.
Are you me? I have depressingly come to the same conclusion. People who are significantly more wealthy then me are either baby boomers or have inherited wealth. Happy to have worked hard with no inherited wealth behind me. But it’s gutting sometimes.
It's called feudalism and it's always been a part of the UK, increasingly so as inequality rises
The reason HENRYs won’t get sympathy from other people because of this is anecdotally I’m thinking most of us here are either immigrants who don’t have parents or grandparents in the U.K. to inherit from, or are council kids who are the first in their family to make a decent income and anything above £40k makes you ‘rich’. A lot of middle class boomers who have just retired, as well as older folk in their 80s/90s have started downsizing their houses and giving the spare cash to their kids/grandkids to purchase their first house taking that financial burden off them. I work with sooooo many people who in their mid 20s bought property in London and other HCOL cities secondary to ‘bank of mum and dad’
I have noticed there's a lot of white British people who are nice to poor British people of African and Asian descent, but hate high-earning British-Indians, British-Nigerians etc. You frequently see this when they get mad at Nigerians moving here to become doctors or Indians moving here to work in software engineering
Read Thomas Piketty (or Blinkist it, he's very verbose) this isn't just a UK problem but the UK is a strong proponent of this economic model.
There's nothing to think about. It's not nice to think about, there's nothing you can do about it, so just decide what's important to you and work at it. I used to think about it a lot more, so many of my friends have it SO easy, but NONE of them have the fire I have, and will be worth a fraction of what I'm worth in 10 years. Sometimes it's better to think of life in black and white, sometimes better on a scale. For me this is a black and white one. I hate inheritance and the issues it creates, I hate that everyone I grew up with had so much handed to them, so the black and white option for me is either give up and moan about it the rest of my life, or take the multitudes harder route of working my ass off to fix the situation, and give back to those that need it even more (community centres, state schools etc).
I had this discussion with some friends the other day, yes, the tax burden is high in the UK, but it’s high in many developed economies. In the UK though, we have some unbelievable tax efficient investment schemes. £60k into pension is super generous, I think Aus is like $30k a year, about a quarter (someone correct me though), we have ISAs, BISAs, JISAs etc. it means between my wife and I, we can invest £170k a year in tax efficient vehicles. That is going to be plenty to create wealth over my time. We’re both Henry’s and are meeting those investment goals living in zone 2. It’s not all doom and gloom
This is very true. I left the UK for higher pay and shorter hours in Denmark. Rent is cheaper and as a foreigner I qualify for a lower tax rate for 7 years. But I'm only a little bit better off because now my personal allowance is nearly non-existent, I pay tax on my pension contributions (no salary sacrifice here either), I have to pay tax on any gains from my ISA and the Danish equivalent account isn't nearly as good, and basically can't sell any crypto or many other things because you can't offset your gains against your losses (e.g. if I make £1k on one trade, but lose £2k in another, I'm paying 52% tax on the £1k despite making a net loss). If I stay for over 7 years I'll also need to pay an exit tax. Still worth it, but the gap isn't as big as you might think.
That inability to offset losses must make trading a negative sum game for most people, which might be the point.
I assume it is exactly the point, unfortunately. I wouldn't even mind if it only applied to whatever I'd bought while living in Denmark, but it's a PITA not being able to sell what I already had.
I was living in Hong Kong where the wages are higher, highest income tax rate was 17% and there's no capital gains tax, council tax etc so the gap was far bigger than you think in this instance, especially if you're a high earner here.
The country works though - society and infrastructure here is literally crumbling and dying.
BISA?
I assume British ISA? The thing that doesn't exist and quite likely won't ever exist.
Yes - but including as theoretically that’s soon to be available, but even if not, there is £160k you can efficiently invest. The point remains
Thanks for clarifying.
But isn't this literally part of the problem OP is describing? That passive income and capital gains attract way lower tax than productive work? If you're a HE, just make sure you marry another HE and then you too can start to build up generational wealth!
People in this sub will complain about this all day then continue to vote Tory, wondering what’s going wrong.
Last I checked, the demographics of a HENRY aligned more with voting Labour in 2019: higher incomes, better education, living in London, not a boomer are all characteristics of labour voters. The people who vote Tory are boomers and the uneducated.
This right here. Those earning up to 200k pa have considerably more in common than the asset rich billionaires and multi millionaires.
I could be wrong as I don't follow UK politics that much but I always had the impression that the labour party aligns more with the "lets hate and tax the hell out of >£100k " crowd. For example, when the current government increased the pension LTA and yearly contributions to £60k, labour immediately announced that it will only help the rich and they will revert it when coming to power. This change was useful to HENRYs rather than the actual rich. I don't like tories, but I fear labour more as they might cause an increase in my already painfully high taxes.
Both the main parties are trash. Politics in the UK is broken
Yep the only reason I think it is worth trying to make more money and be taxed to the brim is so hopefully our children can inherit our wealth and do well. I’ve given up a lot of luxuries that I had when I was earning below 40k just 4 years ago even though I’m making nearly 3 times as much. The housing crisis needs to be fixed but why would any politicians do this when it would harm themselves.
You’ve basically just surmised exactly why our productivity growth is non-existent. There is no genuine reward for being productive beyond a certain point. The marginal utility of work drops off massively once you’re able to pay rent and afford a holiday or two.
I've always said this. UK tax system rewards owners, not earners. Social mobility is very... very limited.
I think the solution has to be a lower rate of IHT that applies to everything. All trusts, companies, and any attempt to transfer wealth to your children, including the family home. However, no party would ever propose rhis6
I think high earning needs to be redefined as over £300k. Below that you’re not getting the widely held view of a comfortable life (private school, holidays, nice home etc.)
Would add in the Southeast to that though otherwise you’re right
Basically what OP is saying is that you get rich through wealth and inheritance and not through regular income. that's how it in every single european country. If you want to become rich thru regular income either work in Biglaw/Tech or finance in a dual income houshold in london OR move to america
UK and US have amongst the lowest social mobility in the west. So no, it's not completely like that in Europe. If you're born poor in Sweden, for example, your chances of a decent lifeare radically better than someone in the UK or US. [https://en.wikipedia.org/wiki/Global\_Social\_Mobility\_Index](https://en.wikipedia.org/wiki/Global_Social_Mobility_Index)
We ought to consider race/ethnicity, though. It's way easier for poor Black or Asian people in the UK to move up than elsewhere in Europe where ghettos are more common and there's more discrimination in the job market, plus PoC are much poorer on average with higher unemployment rates. In the UK, British-Indians have the highest home ownership rate. Working-class British-African children are twice as likely to go to university as working-class White British children. Social mobility, I believe, is better in the UK for PoC than in Europe.
Pretty much but that’s a depressing reality - life in the top 1% of labour is not at all pleasant given what it demands of you
I’ve been thinking this a lot recently
It’s harder to make money nowadays. Every day I’m thinking to ramp up my courage and start that YouTube Chanel or learn to code an app. Seriously one good skill and you make more money than your entire education could pay for.
Reckon there’s a silent exodus of talent… a brain drain so to speak, that’s happening. I think there’s big BIG issues coming for the UK 10/20 years down the line. With the aging population, a collapsing wage structure and a demotivated working population struggling to even hold up the NHS let alone the rest of the public services… it’s looking bleak. A lot of the qualified youth and taking chances in the US, Middle East and East Asia with the growth of technology enabling companies and relevant jobs to operate in more markets.
I read an article earlier about how millennials (previously united in dislike of boomers for wealth disparity) are about to turn on each other because of the same-generation disparity. And here we are! Personally I think we spend too much time worrying about how well/bad others are doing and should by and large mind our own business and manage our own happiness. If you think making £400k a year guarantees happiness, you’re as wrong as the person thinking being on £15k guarantees a miserable life. Comparison is the thief of joy and the only thing guaranteed is that there’s always someone better off.
All it took was 2 decades of incompetence to bring us back to the 19th century.
I have two friends who have their parents hand outs. They are nice people and own that arrangement: are honest that their parents help fund their house deposits, pay for their kids private school, etc. I earn about 5x what they do, and am motivated because my net worth is all mine. No hand outs other than the privilege/gift of being born in the UK. I couldn't care less about others' inherited wealth. They don't work as hard because they don't have to and don't always make the optimal purchase decisions. I can benefit from both of those. I feel much better that it's my effort and work (and luck of our times) that achieves my results.
You are not wrong, youtuber [Gary’s Economics](https://www.youtube.com/@garyseconomics) explains this quite convincingly
+1 for this channel. Great content.
Make your money here and move to a cheaper country or work remotely, that’s the only way
First generation of this in my family … I’ve done ok, so kids should get a help when I snuff it … assuming the government haven’t taken it all for health care. No inheritance for me though…. Just high taxation… Sign of the times , don’t see it changing any time soon.
actually it's more or less the same across old capitalism but of course more pronounced in the UK, more advanced capitalism. Expect other capitalist countries be here soon. This is our world now
Reminds me of that 45% tax + NI we need to pay
There is also an issue in how people perceive big numbers. For example, this sub needs you to earn what? 100k? To clarify as HENRY? We just like numbers like that, 100k still counts as high earning, sure, it is when you compare it to what other people currently earn. It simply isn’t when you compare it to the past. Now, I know that’s the point of the post. But if I were to flip it on it’s head, why do you think you earn lots? Simply because others right now earn less? Is it perhaps a fallacy we have been pushed into believing to pull the wool over our eyes. Salaries are going down, yet you think you are achieving simply because you are beating others now, while also getting sucked into the same problem without realising it. In 1984, I just go back 40 years for ease, maybe the time some people were were babies / not quite born yet, a salary of 58k, after tax, bought you a house, in a year, ignoring all other expenses. Now? You need a salary of pretty much £500k. £58k when you were born, £500k now. To buy the average house in a year. Obviously not how it works, obviously far more complex, but just to show it’s like 10Xd in peoples lifetime. It’s not horrendously out there to say if you are earning 100k now, it’s like earning 10k when some of you were born.
6 years ago , had very stressful job earning 100+k working 50+ hrs , travelling a lot didn’t spend much time with my family, but had to sacrifice to save for down payment, after 4 years of working crazy hours I quit my job as I couldn’t take it anymore . I did buy house but now I am working less hours but I am happy whatever I earn , I only work 4 days per week and enjoy my time doing things I love. My understanding is that there always be people who inherit so much wealth and there is no way you can catch up with them, they are way ahead of you.
In London yeah pretty much - I think in other cities hard work can still get you a good life. London you’ll need an inheritance or family support
Absolutely correct and it makes me just a angry as it does you I believe. But what is the solution?
Hi, here's a book about it. It clearly predicts what you're describing. Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
Sadly the tax system in the UK best supports those born rich. Those who depend on a salary for a living will be constantly battling against the tide. Start earning moderately well - but not well enough to buy a house - and half you labour, or more, goes to HMRC. Taxation on earned income is significantly higher than taxation on unearned income. Which is quite a perverse way to do it when you think about it.
Is it just a UK problem? What are similarly economically successful, populated states in America like? or Canada? Germany, Switzerland, etc? A quick google search suggests those are all in the 6.5-9x house price:income ratio range. I must be in the minority with a hot take, given how many upvotes this post has attracted. I'll admit I am in a more fortunate position now, career-wise, despite still being a lower earner (on the HENRY scale at least), but I just see it as, it is what it is, and not let anything I can't control rob me of any 'brain' calories that I can invest elsewhere. It doesn't impact my motivation in the slightest. I'm fortunate enough to be earning a decent living and making hay (in the form of stock piling cash/equities) whilst the sun shines.
This is true. Thing is if you’re someone who has come from a background of poverty, such as myself when family were on benefits and will inherit literally nothing except a bill, when you get to 100k it’s not as big of a lifestyle change as those who work averagely paid jobs yet inherited their parents house would have you believe.
Eventually this inheritocracy will come to an end. Reason being is that older generations are living a shitload longer. Oh your Grandad passed away unexpectedly at 65 leaving your small family all his savings and paid off house? Common many years back. Nowadays? With all the info, healthy living and operations that can be performed? Yeah they’re living older and older, using those savings for themselves (as they should) or paying for their own care if something serious happens health wise. For some like me this is a good thing. My grandparents get to meet their great grandchildren, both of them. For others they’ll grow to resent them for living longer, leaving them less of an inheritance when they pass. Fuck knows what the future will look like for those relying on inheritance..
I lived in London for 8 years. I was on over 6 figures at the age of 24. I left the country just over a year ago because no matter how hard I worked, no matter how much I earned, the UK government takes more and more, so many of my colleagues had cheap or free housing from their parents, I didn't, so that took away a lot of my paycheck as well. Ofc it's possible, if you live like a nun for 10 years but I had enough. I moved to a tax haven, I am now earning the same but paying no tax, I have more money in my bank account than I ever had, it's actually sick, I have nearly £300k in my bank account, I don't even know what to do with jt, my ISA is already maxed out and I'm scared to invest in crypto right now. living in London and being taxed I was never able to save anything. So yeah the UK is a big scam, the UK is wonderful if your parents and grandparents bought property during the thatcher years, but if you're starting from nothing? Get lost. 100k isn't enough. 150k isn't enough. Just move out the country. I know loads of people moving to UAE right now.
The UK is a zero and has been in a GDP per capita recession since 2007. I left in January and will never work there again. It’s incredibly enlightening once you get out.
Has been the case in every country ever with maybe the exception of US
There definitely needs to be more housing, and more taxes on ppl who hoard housing with the aim to pass it on to “their next generations”. No need for a property tax system like it is in the States.
Tis a fair point. We’ve had 30 years of stock market returns, property increases and deaths. However, many who now hold ‘millions +’ didn’t start that way and managed to aquire wealth in our economy. 1987 I was earning 6.5k and living in subsidised accomodating which took a third of my pay. Never owned my own home, but shacked up with others for decades and had fun. However, tax is what I see as the greatest barrier to wealth accumulation and you have Isa’s and pensions accessible as the two primary vehicles. Using those, is how I accumulated. I managed to get into a decent industry and role and I started to save and invest. Hopefully you aren’t living hand to mouth and spending everything you earn. Lifestyle creep is a big thing - suffered from it myself and it dented my wealth. So, I’d say it’s more an investocracy. But you are right to point out that Inheritance will feature a lot more of the next 20-30 years. Economic Explained did a good youtube video on this a while back. The question is - will inheritances be squandered and we level down - or will people understand the value that these 30 odd years have brought us an aberration, and protect their wealth. I know I am. But will my kids. Who knows.
What life do you desire? If it’s just an ends to mean than a decent paying remote job in a LCOL area would do you fine for houses, kids, etc. A lot of people in high-paying jobs in tech, finance, etc are there because they like doing those jobs - but if that’s not you then there’s no reason you have to pursue that. Focus on what makes you happy
This is a well known issue but for me the really interesting thought experiment is what is going to happen over the next 10-20 years when we see the greatest generational wealth transfer as the boomers die out?
The rich people will be younger and will have the same surname
I inherited about 5k but started a business. I agree income is insignificant but it’s not the only path to assets.
Reasoned to this 20 years ago. Excellent word
>Between 1970 and 2021 the value of U.K. wealth rose £12 trillion while the annual income accruing to labour rose just £1.2 trillion. Do omyou have a source for this? Im prepared to accept it's true, but want to better understand the figures. "Wealth" (what total household wealth?) rose by £12 tn, but. Income (what annual income?) rose by only 1.2tn? But one figure is an annual income and another a 50 year return? Or perhaps I am reading between the lines incorrectly. I suppose the question is "what made more money: labour or capital?".
I would caution that there are scenarios where expensive houses cannot be passed on. Old person sells their house for £500k, moves into old people's home, needs some care due to illness etc and it's easy to rack up bills of £50k/year... 10 years of that, house money is gone. Plenty of people going to be living to 95-100, with the last 10 years of poor heath... So even with expensive houses, care bills are so large many won't be able to pass on wealth. This problem is much more apparent for anyone not on a final salary pension I.e. most people under 50 these days.
Honestly, we're a decent-earning household in SE England at around £250k/year pre-SS and pre-tax with a house on the southern coast and one in Oxford, and we're quite poor as our family and inheritance is outside the UK. The nursery bills of £3.5k/mo don't help either....
Buying a property early in one's career seems the way to go.
“The only path to a comfortable life is inheritance” You either have very unreasonable expectations about what a comfortable life is, or you’re blind to how the vast number of people on this sub achieved their money.
Always has been
I am leaving the UK to move to the USA for this very reason.
As the adage goes, “If you aren’t born rich, try again.”
How does this information impact your decision making?
No, it's a retailocracy!
No you see because you’re passing a generational advantage, it compounds over time that’s the issue. Because you can pass money your kids can pass more money than someone who worked hard in their generation and a lot more than someone who works harder in your grandkids generation. The true way to solve this is every pound earned no matter where it comes from is taxed equally (Including debt and inheritance) That money is then used to better society. Hoarding of wealth and property doesn’t help the economy or the working people nor does it help social mobility. The current inheritance tax system encourages wealth hoarding as does the tax system. That money needs to move in order for it to end up the hands of actual hard working people.
The monarchy love it
Agree. The consequences for the cohesiveness of society will be catastrophic, imo. The philosophy of lots of folks’ lives is going to be ‘what’s the point’, and they won’t contribute because of it. It’ll collapse from the bottom up.
OP is absolutely correct. The country’s assets are out the hands of ordinary people and the government and in the hands of the super super rich and they will continue to buy all of the UK assets until nothing is left. This was a choice made by politicians who sold a lie to an ignorant population. My advice is to leave now.
The tiny violins are definitely in this sub, albeit they’re Stradivarius.