After I began working within the early ‘90s, incomes £100,000 a yr meant you’d made it. Correct cash. The sort that freed you from Ryanair, and meant another person would do your ironing and fold your towels into origami swans.
Then tax, inflation and associates doing higher than you occurred.
I’ve all the time labored, and principally lived, in London, the place £100,000 is Monopoly cash. It sounds spectacular till you realise, you’re nonetheless sleeping on Ikea furnishings, your “en suite” is a nook sink in your bed room, and the bathe has a curtain that adheres like a needy kitten. Fancy shopping for your individual dwelling on a £100,000 wage? Good luck. In Zone 3, a modest two-bed with “character” (translation: damp, probably haunted) will set you again £600,000. That’s earlier than stamp obligation, solicitor’s charges, and your builder tutting on the high quality of the wiring.
Payslips are a fantasy, since HMRC extract a lot — earn greater than £100,000 and your private allowance vanishes sooner than a primary minister’s integrity at PMQs. Between £100,000 and £125,140, you’re in impact taxed at 60 per cent for that portion of your earnings. A fee so steep it ought to include crampons and a sherpa.
For some, incomes a six-figure wage makes you wealthy. Wealthy sufficient, based on the federal government, to be stripped of advantages and allowances. No tax-free childcare, no assist with nursery charges (collectively, value hundreds), no common something. When you earn six figures you possibly can jolly nicely pay full value for all the things.
Maybe you’re considering: “Boo-hoo, poor £100,000-earner. Let’s begin a GoFundMe on your Waitrose necessities”. However I keep a £100,000 wage in London is comfy at greatest. It’s nonetheless consuming packed lunches cash.
So then how wealthy is wealthy?
In accordance with HMRC, within the 2023/24 tax yr, 850,000 people, about 2 per cent of taxpayers, met their definition of “rich”. Of those 395,000 had annual incomes exceeding £200,000, whereas 455,000 owned belongings value greater than £2mn. These with belongings between £2mn and £10mn are formally thought of “prosperous”.
Are you wealthy should you earn £200,000 a yr? Nicely, you possibly can actually breathe quite a bit simpler. You may even ship your youngster to a faculty the place the curriculum contains Latin — however the prices may nonetheless be fairly damaging, because of the VAT on college charges and the occasional “contribution” you need to make to the college roof fund.
Maybe you’ve moved to a leafy suburb, the place your mortgage has extra zeroes than the variety of unread emails in your inbox. You might need a boot room, a canine known as Bramley, and a wine fridge (albeit a small one). You may even begin to imagine you’re doing nicely; till you bump right into a former worker who tells you they now personal a 400-acre farm and a ski chalet in Gstaad.
What about £500,000? Absolutely, now you’re wealthy? Sure, in a lot of the nation, you’d be considered landed gentry and requested to open village fêtes. However in London, you’re simply one other particular person Googling “Can I set up a basement pool in a conservation space?” You may lastly be capable to purchase a townhouse with off-street parking, rent a live-in housekeeper, and personal an Aston for the weekend.
But the tax system punishes you. You’re paying over £200k yearly to HMRC. The marginal tax charges nonetheless chew. Your perks have evaporated. The college charges preserve climbing, the cleaner desires a pay rise, that final vacation drained the checking account since you insisted on turning left and the council fees you additional as a result of your modest home on the coast with dodgy WiFi counts as a second dwelling.
Regardless of incomes a wedge, you continue to don’t have the trimmings of what most individuals would actually think about wealthy. You’re not putting in mature olive bushes in your newly landscaped backyard. You don’t personal a wine cellar with temperature-controlled zones or a dressing room with bespoke furnishings, Lutron lighting and a Sonos system that’s co-ordinated all through the home. Nor the designer kitchen filled with Gaggenau equipment, or the driving force, helipad or sixteen-car storage.
As a result of wealthy. Correct, precise wealthy as of late is constructing your individual spaceship. Internet hosting a marriage so opulent your visitors are flown in on separate Gulfstreams to keep away from awkward small discuss. It’s not simply proudly owning a ship, however a crewed yacht, with a assist vessel for the toys. And the island you retain them on. It’s shopping for a watch costing greater than the GDP of Andorra. Or just opening a bottle of Krug as a result of it’s lunchtime.
But our tax system sees no distinction between you, nonetheless battling rising council tax payments and Mr Area Cowboy Bezos. Earn £125,141? You’re in the identical bracket because the bloke who purchased a spot in Monaco as a result of they fancied a brand new postcode. Worse, should you’re a part of this supposedly wealthy class, you’re honest sport. Tax your pension! Scrap your allowances! Subsequent, they’ll make you pay for the NHS with a contactless faucet.
So, how wealthy is wealthy? When you’re asking, you most likely aren’t. Wealthy, conveniently, is all the time another person. Nicely virtually all the time: I’ve been writing Wealthy Individuals’s Issues for eight years, and whereas I’ve by no means as soon as considered myself as genuinely wealthy, in all that point just one particular person has ever admitted to me that they have been — and I used to be on their yacht once they mentioned it.
Incomes £100,000 and even £500,000 doesn’t make you wealthy. If latest years are something to go by, it makes you a goal. A strolling pockets with a pulse.
Wealthy is a relative idea, often primarily based on belongings not earnings. But when the federal government retains this up, one factor’s for sure: we’ll all be poor.
James Max is a broadcaster on TV and radio and a property skilled. The views expressed are private. X, Instagram & Threads @thejamesmax
