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Are people who earn £80K + really in the top 5%?
And are people who earn £25K or more in the top 50%? Very shocking statistics by labour - apparently they are true, although an article in the Guardian incorrectly put the 5% as 1.6 million when according to my calculations that number is 3.3 million.
The BBC Reality Check twitter account says so.
Original post by Treetop321
The BBC Reality Check twitter account says so.
And so does this Reality Check, based on the data freely available on the internet.
I must admit that it surprised that such a relatively low income resulted in being in the top 5%. I can fully understand why that chap on Question Time was so incredulous about it.
Disclaimer - note 'relatively'. Obviously I'm not saying that £80K is 'on the breadline'
Disclaimer - note 'relatively'. Obviously I'm not saying that £80K is 'on the breadline'
Original post by Ferrograd
And are people who earn £25K or more in the top 50%? Very shocking statistics by labour - apparently they are true, although an article in the Guardian incorrectly put the 5% as 1.6 million when according to my calculations that number is 3.3 million.
https://www.gov.uk/government/statistics/percentile-points-from-1-to-99-for-total-income-before-and-after-tax
https://www.ifs.org.uk/tools_and_resources/where_do_you_fit_in
Original post by Ferrograd
And are people who earn £25K or more in the top 50%? Very shocking statistics by labour - apparently they are true, although an article in the Guardian incorrectly put the 5% as 1.6 million when according to my calculations that number is 3.3 million.
Yes it is true it is roughly 80k to get into that top 5% I don’t think it is shocking as such that such a salary puts you in that bracket.
As to your 25k point half of people earn above and half below that wage but let’s not forget this is for all people not just full time workers.
I think the point people should be thinking about is if that median wage is 25k and if 80k gets you to that top 5% status why on earth does a house cost so much which is where the vast majority of people under 40 spend their wages.
This is why in my opinion it is the most important issue facing the people in the country and what I will move all my moans to when brexit is done.
(edited 4 years ago)
Is this just the UK?
Original post by Obolinda
Is this just the UK?
The data yes. It's probably similar to other countries within Europe, though our point of interest is in the UK specifically as election is coming up.
Yes and no, it depends how you measure it.
As per the BBC if you look purely in terms of what your income is, yes £80k is certainly in the right region for the top 5% of earners. However your pure earnings are not necessarily the best measure. Consider two situations, one is a single individual in a small flat earning £80k and an individual who has a stay at home spouse and several children also earning £80k. Their incomes are exactly the same, as far as the government is concerned they are both equally in the top 5% however the second individual is worse off and so if you use the IFS methodology they are not in the same position. If we use £1000 council tax for the sake of argument the first individual is in the top 2% whereas the second (one child over 14 the one under) is only in the top 10% because it considers household income and not individual income.
As for the 1.6m vs 3.3m the1.6m isn't incorrect, it's 5% of earners, not the whole population, so you have to exclude those who are not economically active which means anybody under 16, over 16 in full time education, over 65, or 16-65 but choosing to neither work nor seek work is removed leaving you just with those in work and seeking work (and you might even exclude those seeking work, there are few enough it doesn't meaningfully change the final figure)
As per the BBC if you look purely in terms of what your income is, yes £80k is certainly in the right region for the top 5% of earners. However your pure earnings are not necessarily the best measure. Consider two situations, one is a single individual in a small flat earning £80k and an individual who has a stay at home spouse and several children also earning £80k. Their incomes are exactly the same, as far as the government is concerned they are both equally in the top 5% however the second individual is worse off and so if you use the IFS methodology they are not in the same position. If we use £1000 council tax for the sake of argument the first individual is in the top 2% whereas the second (one child over 14 the one under) is only in the top 10% because it considers household income and not individual income.
As for the 1.6m vs 3.3m the1.6m isn't incorrect, it's 5% of earners, not the whole population, so you have to exclude those who are not economically active which means anybody under 16, over 16 in full time education, over 65, or 16-65 but choosing to neither work nor seek work is removed leaving you just with those in work and seeking work (and you might even exclude those seeking work, there are few enough it doesn't meaningfully change the final figure)
Original post by kkboyk
The data yes. It's probably similar to other countries within Europe, though our point of interest is in the UK specifically as election is coming up.
I'm not even sure other countries in Western Europe would be that similar, certainly not Eastern or Southern Europe.
According to this article 5 years ago to qualify for the top 10% in France you needed to earn over 110,000 Euros, the top 5% would be even higher so takes it away from £80k
This is on a household basis but gives ~6% of German households being on >6k per month post tax, the UK post tax individual figure is ~£5k per month so I would think the German 5% figure may well be lower than ours
In Italy the top 10% take home 25% of the nations wages which isn't too useful without average salary, but while looking for that I came across this which gives the threshold for the top 6% as ~ 120k euros
It's actually quite interesting looking at this, it suggests that inequality, pre tax at least, in the UK really isn't that bad compared to similar countries on the continent.
You maths is correct of sorts, but not economically correct. Dividing income by number of people in the household makes no costs since in any households, there are fixed costs that don't depend on the number of people. If you pay £800 a month in rent or mortgage, it matters not a jot whether there is 1 or 20 people in the house. And variable costs like food do not fluctuate that much. I imagine that 2 people could shop for around £40 a week which is only 2/3 of our weekly £60 shop for two adults and two children. So in your example, the £120k x7 family are vastly more wealthy than the single parent on £40k as disposable income after fixed costs will be much much higher. And you can easily get a mortgage for a large house more or less anywhere in the country for £120k income.
Original post by Ferrograd
And are people who earn £25K or more in the top 50%? Very shocking statistics by labour - apparently they are true, although an article in the Guardian incorrectly put the 5% as 1.6 million when according to my calculations that number is 3.3 million.
Yes, I think it is
https://www.bbc.co.uk/news/50517136
Yes- according to BBC Reality Check and HMRC annual tables.
HMRC figures suggest that earnings in excess of £75,300 are in the top 5% of income tax payers.
But these figures do exclude all individuals earning below the personal allowance levels.
HMRC figures suggest that earnings in excess of £75,300 are in the top 5% of income tax payers.
But these figures do exclude all individuals earning below the personal allowance levels.
People earning £80k+ are actually in the top 4% but the whole argument about taxing the 'rich' more on their income ignores an issue of fundamental importance. Incomes have generally been stagnant for the past decade whilst those with wealth have seen its value rise considerably. Consequently, someone earning £80k today is extremely unlikely to ever be in the top 10% of households by wealth without an inheritance, lottery win or incredible levels of success in the property market. Therefore, it is a mistake to call people earning £80k rich in the first place, unless they have wealth from other sources.
My own situation compared to my in laws is fairly typical. I'm in my thirties and I do earn around £80k once you tot up bonuses, my second job etc but although this is well in excess of the income of my in laws I'll never be anywhere near as rich as they are even with my wife's income added in. I wasn't able to buy my first house in the south east for a four figure sum or never have a mortgage more than five figures large and I'm not likely to get a 400% return on my house over the next 25 years. Also, I'm not going to have a defined benefit pension paid by the government and I'm not going to get to participate in any below market value privatisations of state assets.
A second factor that is ignored is how long someone has earned the money for. A company can defer its tax payments and reduce their liability in a year where they experience a loss but of course individuals can't do that! Someone who earns £80k for a year but then ends up unemployed for four years is still going to pay a lot more tax than someone who earns £80k in equal installments over five years. More practically, some people start earning £80k in their 20s, some in their mid-thirties like me and many don't earn this kind of money until they are in their fifties but we're all taxed the same, even though those who have earned this amount the longest are obviously going to be much richer than other high earners. Although I earn about the same as my brother now, he has a decade of these high earnings over me for example (I didn't earn £30k until I was nearly 30). Timing is further compounded by the fact that those able to buy a house before 2002 are significantly better off than those who could only afford a mortgage much later.
All of this matters because being rich is not solely down to what a person earned in the last tax year. What they own and how long they have been a high earner for matters just as much. Therefore, I take the position that I am willing to pay a little more tax myself but first I want those in the top 10% by wealth -people like my in laws who were never higher rate taxpayers - to be paying their fair share.
What I would propose is a measure of tax based on cumulative income and capital gains over a person's lifetime. Rather than breaking things up per annum, I would front load the personal allowance so that young people only started paying tax after earning their first £100k. The tax rate would then rise incrementally as they gained their second £100k and so on. This figure would be earnings + non-pension capital gains (it would include any residential property).
My own situation compared to my in laws is fairly typical. I'm in my thirties and I do earn around £80k once you tot up bonuses, my second job etc but although this is well in excess of the income of my in laws I'll never be anywhere near as rich as they are even with my wife's income added in. I wasn't able to buy my first house in the south east for a four figure sum or never have a mortgage more than five figures large and I'm not likely to get a 400% return on my house over the next 25 years. Also, I'm not going to have a defined benefit pension paid by the government and I'm not going to get to participate in any below market value privatisations of state assets.
A second factor that is ignored is how long someone has earned the money for. A company can defer its tax payments and reduce their liability in a year where they experience a loss but of course individuals can't do that! Someone who earns £80k for a year but then ends up unemployed for four years is still going to pay a lot more tax than someone who earns £80k in equal installments over five years. More practically, some people start earning £80k in their 20s, some in their mid-thirties like me and many don't earn this kind of money until they are in their fifties but we're all taxed the same, even though those who have earned this amount the longest are obviously going to be much richer than other high earners. Although I earn about the same as my brother now, he has a decade of these high earnings over me for example (I didn't earn £30k until I was nearly 30). Timing is further compounded by the fact that those able to buy a house before 2002 are significantly better off than those who could only afford a mortgage much later.
All of this matters because being rich is not solely down to what a person earned in the last tax year. What they own and how long they have been a high earner for matters just as much. Therefore, I take the position that I am willing to pay a little more tax myself but first I want those in the top 10% by wealth -people like my in laws who were never higher rate taxpayers - to be paying their fair share.
What I would propose is a measure of tax based on cumulative income and capital gains over a person's lifetime. Rather than breaking things up per annum, I would front load the personal allowance so that young people only started paying tax after earning their first £100k. The tax rate would then rise incrementally as they gained their second £100k and so on. This figure would be earnings + non-pension capital gains (it would include any residential property).
When we say “£80k puts you in the top 5%”, etc. are we only talking about full time workers?
Or are we also including unemployed people, students, homemakers, part-timers, pensioners etc. in that?
Or are we also including unemployed people, students, homemakers, part-timers, pensioners etc. in that?
Original post by tazarooni89
When we say “£80k puts you in the top 5%”, etc. are we only talking about full time workers?
Or are we also including unemployed people, students, homemakers, part-timers, pensioners etc. in that?
Or are we also including unemployed people, students, homemakers, part-timers, pensioners etc. in that?
Everyone
Original post by Ferrograd
And are people who earn £25K or more in the top 50%? Very shocking statistics by labour - apparently they are true, although an article in the Guardian incorrectly put the 5% as 1.6 million when according to my calculations that number is 3.3 million.
How did you get 3.3 million? Did you base that on the eligible working population or were you including pensioners babies and schoolchildren in there?
Original post by londonmyst
Yes- according to BBC Reality Check and HMRC annual tables.
HMRC figures suggest that earnings in excess of £75,300 are in the top 5% of income tax payers.
But these figures do exclude all individuals earning below the personal allowance levels.
HMRC figures suggest that earnings in excess of £75,300 are in the top 5% of income tax payers.
But these figures do exclude all individuals earning below the personal allowance levels.
Wouldnt that push them even higher?
Original post by 999tigger
Wouldnt that push them even higher?
Yes.
I read an estimate based on ons figures suggesting if all adults with any personal income were included in the figures, earnings in excess of £81,000 would represent the top 5% of uk earners.
Original post by londonmyst
Yes.
I read an estimate based on ons figures suggesting if all adults with any personal income were included in the figures, earnings in excess of £81,000 would represent the top 5% of uk earners.
I read an estimate based on ons figures suggesting if all adults with any personal income were included in the figures, earnings in excess of £81,000 would represent the top 5% of uk earners.
This man disputed it on QT. Apologies for source.
https://www.dailymail.co.uk/news/article-7713853/Question-Time-member-earns-80-000-slams-Labours-plans-supertax-him.html
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