One in four high-income earners with six-figure incomes live “check-to-paycheck,” a study has revealed.
More than a quarter (26%) of employees earning more than £100,000 say they have no money left at the end of the month, according to a survey conducted by asset management firm RBC Brewin Dolphin. did.
Respondents primarily cited increased cost of living (90%), increased mortgage payments (38%) and debt repayments (29%) as the main causes. In London, 28% of the 1,700 high-income people surveyed said they were struggling to live within their means.
Carla Morris, a financial planner at Wealth Manager, said: “Our findings highlight how the cost of living crisis is having a major impact on all sectors of British society.
“Even the highest earners in the country are living paycheck to paycheck, and almost all of them cite the rising cost of living as one of the main reasons for their position. .”
The tax increase is also having a negative impact on high-income earners in Japan.
Chancellor Rishi Sunak's decision to freeze tax bases until 2028 has created a fiscal drag effect where individuals end up paying higher taxes if they exceed the frozen tax base.
Mr Sunak cut the 45p tax threshold in April from £150,000 to £125,140, bringing hundreds of thousands more people into the top tax bracket.
Personal allowance (how much an individual earns before they have to pay income tax) was also frozen at £12,570.
Once your income exceeds £100,000, your personal allowance starts to reduce by £1 for every £2 above that threshold.
The loss of personal allowance means people earning over £100,000 can effectively pay 60% tax on their proportion of their income.
Research shows that people under 40 are most likely to have difficulties.
Older adults are less likely to have dependent children and more likely to have paid off their mortgage, which reduces their financial burden.
Morris added: “While high-income earners over 60 may not be feeling the pinch as much as younger generations at the moment, they are significantly more pessimistic about the economic outlook for next year.”
“Rising costs will gradually start to erode income. While the state pension will be protected by the triple lock, other savings and the income they provide may struggle in the current environment.”
Once a parent's income reaches £100,000, important benefits are also lost.
If one parent in a couple earns more than £100,000, that parent will lose their tax-free childcare rights, which allow them to claim up to £2,000 per year per child.
Additionally, if your income exceeds £100,000, the amount of free childcare you can claim will be halved from 30 to 15 hours a week, potentially costing you £3,187 per year per child.
Mr Sunak is under pressure to provide further support for childcare costs and address tax increases before his autumn statement.
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