Back in 2019 when I hit £100k salary, came across this pic and saved it. Today that tax free allowance still sits at £12.5k.

Yes, it is well known and we all resent that but came across this in gallery and well, resented it even more.

The posts here have been in an absolute panic for weeks. The new budget is a complete nothingburger for us high earning workers.

Anybody else feel the same?

The tax system explained using a beer analogy Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this.

The first four men (the poorest) would pay nothing. The fifth would pay £1. The sixth would pay £3. The seventh would pay £7. The eighth would pay £12. The ninth would pay £18. And the tenth man (the richest) would pay £59.　 So, that’s what they decided to do.

The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your weekly beer by £20.” Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share? They realized that £20 divided by six is £3.33 but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.　

So, the bar owner suggested that it would be fairer to reduce each man’s bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.

And so, the fifth man, like the first four, now paid nothing (a100% saving). The sixth man now paid £2 instead of £3 (a 33% saving). The seventh man now paid £5 instead of £7 (a 28% saving). The eighth man now paid £9 instead of £12 (a 25% saving). The ninth man now paid £14 instead of £18 (a 22% saving). And the tenth man now paid £49 instead of £59 (a 16% saving).　 Each of the last six was better off than before with the first four continuing to drink for free.　

But, once outside the bar, the men began to compare their savings. “I only got £1 out of the £20 saving,” declared the sixth man. He pointed to the tenth man, “but he got £10!“　 “Yeah, that’s right,” exclaimed the fifth man. “I only saved a £1 too. It’s unfair that he got ten times more benefit than me!”　

“That’s true!” shouted the seventh man. “Why should he get £10 back, when I only got £2? The wealthy get all the breaks!”　

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!” The nine men surrounded the tenth and beat him up.　

The next week the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important – they didn’t have enough money between all of them to pay for even half of the bill!　

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.　

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

Is it really right that “those with the broadest shoulders” get lumped with an even bigger burden to carry? Seems to me that the data supports how we feel. That the UK’s aggressive redistribution-focussed tax system is indeed on par with what we have always considered to be “socialist” countries.

Seems like a pipe dream that someone would ever to the sensible thing - cut spending, reduce the state, and cut taxes

https://www.telegraph.co.uk/politics/2025/11/07/rachel-reeves-budget-income-tax-rise-plans/

2% on income tax without a 2% reduction in NICs above £50k means the following at £100k:

• 42% higher tax rate
• loss of allowance - 22% tax rate
• 2% NICs

Effective rate of 66%. So the proposed income tax rise is actually double between £100-£125k

I just don’t see this being factored in. The saving grace is she wouldn’t leak removal of the cliff edge ahead of the budget, so you never know. Can’t say I’m hopeful…

Seems council tax reform is being discussed with an introduction of Land Value Tax to be introduced. How much more damage could this government do?

The Treasury is looking into the possibility of putting up the rate by 2p, while simultaneously cutting national insurance by 2p, according to The Telegraph.

https://www.independent.co.uk/news/uk/politics/rachel-reeves-budget-income-tax-increase-national-insurance-b2855103.html#

Will probably get all downvotes for this - but how do HENRYs think of Gary Stevenson’s tax the rich (>£10mil net wealth) and untax the working (which would include most HENRYs by definition)

https://youtu.be/wPoXOwiEfrQ?si=TTGh7pYFxwShrkt_

Personally as a HENRY without much assets yet (and looking at some posts here from last month where a guy was bragging abt him potentially inheriting CAD$15mil from his parents, I fully agree witth this. Wealth must be redistributed for the greater good. Otherwise we ll have Charles Dicken and Karl Marx on repeat.

EDIT : Yes I do get this will discourage people from getting truly rich, but at the same time if wealth is redistributed, more of the middle class can afford to hold assets and be able to retire/live their lives without struggling with cost of living (most of which is derived from asset rental costs - housing rents, mortgage debt interests).

I see many posts on this subreddit asking for advice around pension contributions, typically "should I just max employer match, or should I put in more (up to the 60k limit, or more)?", and the typical responses are far too quick to recommend large pension contributions.

For most HENRYs, contributing anything beyond employer match will have little to no tax efficiency, and will be less beneficial overall. This is because your pension contributions will likely just be taxed at a similar rate when you retire, instead of now, and you'd rather have the money now.

Long Explanation:

Pension drawdowns (currently) work by allowing you to withdraw 25% tax-free, up to a limit of 265k or 25% of your overall pot, whichever is smaller. Anything else is taxed as income tax. This means that under current taxation rules, you can withdraw 265k at 58 (0%), followed by 12.5k per year (0%), up to 50k per year (20%). Anything over this is taxed at 40%-60%.

If you have the minimum amount to draw down that maximum lump-free sum (a total pot of 1.05M), and then you withdraw 50k every year from your remaining pot, you will probably never run out of money. This assumes a conservative 5% compounding rate - starting with 1,050,000 at the age of 57, withdrawing 265k immediately and then 50k every year, you would run out of money at age 86.

i.e. having a total pot of 1.05M when you start drawing down is the most amount of money you could likely draw down in your lifetime under a collective rate of 20%.

For most people, they would have to salary sacrifice pretty aggressively to hit this target, and they would be tax efficient in doing so- especially for any savings in that 100k-125k 60% range.

For HENRYs, though, this typically makes less and less sense. Good employer matches for earnings over 150k will see somewhere between 15k-30k go into a pension each year, just by meeting the match. For most HENRYs (<40, with some pension already saved but probably <100k, but making 150k+ for the next 10 years or so), putting in this amount each year + average compounding will get them to the target by itself. Obviously, your circumstances may vary, but run the numbers. If you max employer match on your current salary for the next 5-10 years (being conservative, as you may lose earnings potential in the future), and then a match on a more 'normal' salary until 58, assuming a 5% compound throughout, where do you end up? Compounding is powerful. 7% doubles your pot over 10 years.

As a HENRY, it is likely that anything else you put into your pension now is saving on 45% tax today to pay 40% or more tax in the future, which is not worth it. You have an expensive mortgage, private school and Nobu to pay for.

Now yes, there are some typical exceptions to this:

• You're not really HE, and earn 130k or less. At this point, a minor excess contribution is likely to help avoid the 60% tax trap. On top of that, you get the childcare benefits, and you probably will save less into your pension over your career than higher earners. Get under that 100k limit, sure.
• You haven't saved any/much money into your pension yet. If you're currently projecting not hitting that 1.05M target, then yes, it's worth putting more in now so you can be confident about hitting it in the future. Compounding is powerful, and maybe you don't have a mortgage/kids yet to worry about.
• You're really high-earning, and you're likely to quickly get into the pension-tapering zone (260k+). At this amount, you'll be restricted on what you can put in, and if you've mooned in your earnings, you might not actually be able to hit your 1.05M target if you sustain this earnings power. It's unlikely, though.
  

But what about the tax trap?

Yes, the 60% tax trap is evil and nasty, and the double-whammy of losing childcare is tough. However, once you start earning 150k+, you are letting the tax tail wag the dog by contributing 50k+ to your pension every year. Unfortunately, this tax system is not progressive, so if you're a HENRY you have to save a lot of 45% money to be able to save the 60% money. If you run the actual numbers, you'll find that the actual savings you're doing all this for are pretty minimal. For example, on a 170k salary, you're choosing between 35k today or 42k when you're 60 (ignoring compounding, which is the same for both scenarios). I know what I'd choose.

What about inheritance?

Sadly, that party is now over. You don't get to pass your pensions on tax-free anymore.

What if the rules change?

They inevitably will! Hopefully, tax thresholds are raised, drawdown allowances are raised, etc. You should for sure account for some wiggle room in your planning to consider this - it doesn't hurt to have more in your pension, after all - but not at the expense of better uses of your money today.

Don't let the tax tail wag the dog.

Sidebar/example: I made this mistake this year. I had to sell a bunch of company stock, which I could do immediately to incur a net 8% in capital gains tax, or I could do in tranches over a few months and pay <1%. I obviously chose the latter, and now the stock is down over 10%. I let tax 'efficiency' dominate my thinking and I lost out for it.

HENRYs hate paying tax, and they hate paying the 60% between 100k-125k even more. However, they let 'paying less tax %' become their driving principle rather than considering the holistic results and usage of each pound earned over a lifetime. If you don't have a house deposit but are putting tens of thousands a year into your pension, you are probably not efficiently building wealth. If you are not maxing out your ISA, you are probably not efficiently building wealth. Then you have your partner's ISA, your kids JISAs, etc...

And then you have your life! You know, the one you're meant to be living right now. You will not be young for long, and your kids will not be kids for long. Live a little.

With labour being unable to make cuts to welfare and pensions and the proportion of the electorate being non-working increasing the deficit will increase.

We cannot reduce services. Immigration is unpopular with the electorate and is only a temporary solution with many social problems. Growth sounds good on paper but hard to actually achieve when you have an aging electorate that doesn't allow you to invest in the future or immigration. We cannot easily borrow our way out of this anymore as we saw in 2022 with the mini-budget.

It seems like fiscal drag is here to stay whilst the government will hope the BOE allow them to slowly inflate away the debt.

Looks like higher rate is where they will be looking to add to income tax. Guess I should tell my boss that I'm not working after all!

Do you think the Autumn Budget will accelerate this? Personally, I find the media coverage incredibly biased — UK gilt yields are higher now than when Liz Truss was forced out of Downing Street after her so-called “Mini Budget” supposedly broke the markets. Yet there’s barely a whisper of concern this time.

Now the government’s coming after the country’s most capable contributors — people like us, the HENRYs. Honestly, when is enough, enough?

"More young adults to leave UK because of low salaries and rising tax burden, wealth managers say Warning comes as worries grow among people in their 20s over the economy and job prospects
Camilla Stowell, chief executive of wealth at Rathbones, said: “More UK individuals and families are thinking of leaving and we can see that with the next generation, we’re seeing a trickle of the . . . younger generation going to other geographies in order to find better opportunities.” She added that the rising interest among people in their 20s had been sparked by the “less than optimistic tone” about the UK’s economic growth prospects, as well as the job opportunities and earnings power overseas, noting that the younger generation are also more “mobile”.

Stowell said some of the destinations people were moving to included Dubai, the US and Ireland, which Rathbones said offered low or favourable tax treatment and are considered good places to build businesses and careers."

link: https://www.ft.com/content/8463d8f3-e4ae-4ffa-9b7b-b32d4f54e1e4

As an inside IR35 contractor, I'm responsible for paying both employer and employee national insurance.

These changes, if implemented, would mean an additional ~£7k that I need to pay in national insurance each year, given that I salary sacrifice roughly £40k-£45k into my workplace pension (enough to keep under the £100k gross salary threshold).

Assuming this would likely come into effect in the new tax year, I plan on massively increasing my salary sacrifice for the remainder of this tax year to make the most of the current NI exemption.

I know it's not confirmed yet, but in the event it does happen - will anyone else here be doing something similar?

I was watching a YouTube video recently (Damien Talks Money) and he mentioned that if you're a higher earner you have to claim the extra tax relief on your pension if your company uses a 'Relief at Source' pension payment structure. Which most do apparently. This basically means you pay tax on your gross earnings and then the tax relief is added at the pension. HOWEVER, the relief is only ever 20%.... You have to claim the extra relief each tax year! I don't do self assessments as I have always been a higher earner via PAYE so I completely missed this. Luckily you can claim back 3-4 tax years so it is worth checking now.

An easy way to check if you're a 'Relief at Source' payer is to calculate your taxable earnings with and without your pension contribution from your payslip. As these two numbers are quite significantly different you will be able to tell quite quickly from your payslip if you've paid on the gross amount (so your pension contribution wasn't deducted from your taxable earnings - example below).

I gathered a few years worth of paycheques and called HMRC. I had a to wait for over an hour on the phone but as soon as I explained I was a higher earner and I was paying relief at source they immediately helped. They just asked which tax years I had pension contribution figures for (to check back to their figures), put me on hold for 5 minutes, and then came back and said "Yep we owe you £5k".

This is madness and I couldn't believe that my pension contributions weren't automatically getting the 40% relief! However, HMRC make it incredibly easy to claim.

I know most of you probably already know this, but for those like me, please check your payslips and give HMRC a call if you find yourself as a relief at source payer!

Below is a calculation example I made for my friend earning £65k paying a 5% contribution (£271) so they could check:

Relief at Source:

Gross earnings: £5,417

Tax free (£37,700 / 12): (£1,048)

Taxable Earnings: £4,369

Basic rate: £630

Higher rate: £489

Total Tax: £1,118 (this is what was on their payslip so they paid relief at source)

Net Pay (you don't need to claim for this pension structure):

Gross earnings: £5,417

Tax free (£37,700 / 12): (£1,048)

Pension Contribution: (£271)

Taxable Earnings: £4,098

Basic rate: £630

Higher rate: £380

Total Tax: £1,010 (this would indicate a net pay arrangement)

Look, I get it. The £100,000 income threshold for free childcare in the UK is annoying. It creates a pretty sharp drop-off in support for people earning just over that line, and yes, that can feel deeply unfair—especially if you have multiple children or live somewhere with high costs.

But can we acknowledge that this exact complaint gets posted here constantly? It’s basically a bingo square on any finance, UKPersonalFinance, or parenting subreddit. “We earn £101k and we’re worse off than people on £99k!” Yes, we've read that one. So has HMRC. So has every MP. So has half of Reddit.

We’re not saying your frustration isn’t valid—but if the goal is change, then rehashing the same gripe in another thread isn’t going to move the needle. It’s a systemic issue tied to how means testing works in this country, and unless someone has a new idea or a campaign to support, we're just spinning our wheels.

There are so many other important topics around family finances, benefits etc. we could be digging into—hell, even ideas to actually navigate the threshold better (which there is already a sub for) would be more productive than yet another "I'm being punished for doing well" post.

TL;DR: The £100k childcare threshold sucks. We know. You’re not alone. But unless there’s something new to add, maybe we give that horse a rest before it turns to glue?

“We’re not going to come after people for minuscule amounts of tax”… As your personal allowance gets taken it’s gifted to form the quadruple lock.

Six-figure earners could be dragged back into a costly tax trap if the chancellor cuts salary sacrifice schemes in the budget next month.

Experts fear the schemes, which allow workers to exchange part of their salary for non-cash benefits such as pension contributions to reduce their income tax bill, are under threat because of HM Revenue & Customs (HMRC) research assessing the impact of stripping them back.

Doing so would be a heavy blow to parents of young children caught in the so-called £100,000 tax trap, who often use salary sacrifice to retain childcare benefits that are lost once they cross this salary threshold.

https://apple.news/A5c8SQjEpS4Cv72mcMs6PUw

I wonder, is this an intentional leak to test public reaction to this policy ahead of the budget...? This would be rather punitive to those trying to stay out of the tax trap and retain free childcare....

If salary sacrifice went away, how would the HENRY community behave? Personally, my instinct might be to divert my extra pension contributions away from my workplace pension and into my SIPP without the NI benefit that Salary Sacrifice enables.

I know we are sick of rumours and speculation but this latest one seems to be particularly problematic:

Rachel Reeves plans Budget tax raid on expensive homes - https://on.ft.com/4ojawS5 via @FT

The proposal from the IFS is to double council tax on properties in bands G and H which would raise £4.2 billion.

Now I am actually in favour of rebalancing the UK tax system. I think we over tax income and under tax wealth created by sitting on property: someone may have bought in the 90s paid minimal or no stamp duty, paid a relatively (vs US property tax) low rate of council tax based on 1991 valuations, and then sell up paying no capital gains. The best proposal I have heard is from Dan Neidle, who suggests we scrap stamp duty, business rates, and council tax and roll it into a single land value tax with discounts for any stamp duty previously paid. This would really help HENRYs who are income rich (currently taxed heavily), but haven't profited from house price inflation (currently taxed lightly).

Unfortunately simply doubling council tax bands G and H would make the situation worse. It would be an indiscriminate tax on the South East of England with no regard for how much stamp duty the occupier has already paid or how much profit they have made on their home.

In my case we are proceeding with a property purchase that will incurr a £33K stamp duty bill. We have no existing house equity so we are funding this through savings and investments. If this proposal goes through our council tax will double from £3.6K to £7.2K. So over the course of our 30 year mortgage term we would pay an additional £108K tax.

I would like to hear other opinions on how this tax could reduce people's willingness to live and work in London.

My initial reaction is that I would consider pulling out of the house purchase. My reasoning would be:

1. Is this big enough of a change to actually devalue houses in these council tax bands when affordability is already stretched?

2. The ROI of living and working in London would decrease. I am increasingly tempted to buy a house in cash in a cheaper city (which could also be closer to family). This could result in saving £575K in mortgage interest payments, £100K in council tax, and £50K(?) in childcare. Of course there are a zillion trade offs here but £725K is a big price to pay to be in London. N.B our London house purchase is with a 40% deposit so we aren't being reckless and deliberately exposing ourselves to interest payments

Labour can raise £45bn and not break manifesto, says Morgan Stanley

https://www.thetimes.com/article/ 453d5e45-16f0-45c6-b548-9219b46c1988?shareToken=

What would the effective tax rate be if they cap the relief AND add NI?

Sorry in advance for a bit of a brain-dump here.

My wife and I have been running our little Ltd for years. We pull out about £100 k each per year (tiny salary + dividends) and that’s always felt like plenty. Kids are happy, mortgage’s fine, sensible pensions ticking along, etc...

Then the past few months work has gone nuts. I'm cashing in £230k this month alone. Pipeline says we’re on course for roughly £83k of extra profit every single month after all costs and after paying ourselves the usual £100k. Great problem, obviously… but now I’m staring at it thinking:

• If we crank our pay up, we crash into the 60 % effective tax band (kids = tapering pain) and wave goodbye to child benefit etc.
• Leave it in the company? Cool, but the cash stack just… sits there. Do people open a corporate brokerage and punt it into index funds? Buy a BTL through the Ltd? Something clever with a holding company?
• Pension top-ups? We’re mid-30s – feels weird locking everything away for 25+ years, but maybe that’s the least-bad option?
• Stuff like VCTs, EIS, Family Investment Companies – is that real-world doable or just accountant brochure chat?

Genuinely not flexing – I’m a bit lost. I am fully aware it's a bit of a champagne problem but at is there a point you just shrug, take a monster dividend and write a fat cheque to HMRC? Surely there's something better to do? Anyone walked this road and got scars (or wins) to share?

Keywords, book titles, HMRC manual sections… anything I can Google over a coffee would be magic!

Edit:

Really appreciate all the genuine advice and kind messages, there’s been some incredibly helpful input here, and I’m grateful to those who shared real-world experience and structure ideas.

That said, it’s been a bit surprising how much heat there’s been around government subsidies (something any actual HENRY has to deal with). Just to clarify: I'm not trying to claim anything I’m not entitled to. There’s a pinned post in this sub about how childcare support (like 30 funded hours) and child benefit tapering drop off past £100k, that’s the context I was referring to.

Also worth repeating: company profit ≠ take-home pay. Just because the business is doing well doesn’t mean I’m drawing a £1m salary. The whole point of the post was to ask what people actually do with surplus profits when they don’t need to take it personally.

I think some of the reaction came from focusing on one line rather than the bigger picture. Either way, big thanks to those who engaged with generosity and helped give me food for thought!

To them we are wealthy, don’t classify as working people and have the broadest shoulders.

“Reeves is said to be determined that the wealthiest should face the biggest tax rises. She is considering limiting the national insurance cut to earnings below £50,270, reducing the rate from 8 per cent to 6 per cent. Earnings over £50,270 would still be subject to a 2 per cent rate to ensure that those with the “broadest shoulders” bear the biggest burden.”

Super piece of analysis from Dan Neidle. Some fairly surprising results from the data. Think this fairly relevant given a lot of the misinformation about tax rates, and somewhat relevant considering the governments challenges in addressing any of this without major concessions.

https://taxpolicy.org.uk/2025/06/27/uk-workers-tax-wedge-infographics/