What Salary is Enough to Be in the Top 5 Earners in the UK?

As of my last update in August 2023, the gross annual income needed to be in the top 5 earners in the UK should be around ￡70,000 to ￡80,000. However, this figure can vary based on the specific data source and current economic conditions such as inflation and job market changes. For the most current information, you should reference the latest statistics from the Office for National Statistics (ONS).

It is a common misconception to believe that earning above ￡120,000 per annum guarantees a position in the top 5 earners. This belief arises from a misunderstanding of HMRC's tax data, which reflects income based on those who pay income tax rather than reflecting overall income percentiles. According to HMRC, a salary of ￡73,500 is enough to be in the top 5 of taxpayers.

The key point here is that the top 5 of earners based on income tax payers is not the same as the top 5 of overall earners. An individual earning ￡80,000 may be in the top 5 of income tax payers but not necessarily in the top 5 of overall earners. The top 5 earners represent a 'very steep line,' where the fifth earner falls below what many would consider the top 5 in income distribution.

The Misunderstanding Behind the Top 5 Income Tax Payers

The misunderstanding stems from the fact that a significant portion of the working population does not pay income tax. Approximately 43% of adults in the UK do not pay income tax, making the figures misleading when trying to determine the exact top 5 earners.

To provide a more clear picture, the figures for 2017 from HMRC show:

Top 5: ￡70,000 annual threshold Top 1: ￡140,000 annual threshold Top 0.1: ￡990,000 annual threshold

This data helps to illustrate that a salary of ￡80,000 does not place an individual in the top 5 in terms of overall earner status, but rather places that individual in the top 5 in terms of income tax payers. The misconception arises from considering only the income tax payers data without understanding the broader context of income distribution in the UK.

Moreover, the term 'squeezed middle' is often used to describe the socio-economic position of individuals earning around ￡70,000 to ￡99,000, who may not be among the top earners by national standards but also do not receive financial assistance due to their higher income levels. This group often faces challenges in certain areas of spending due to limited financial support and inability to compete as price insensitively as higher earners.

Conclusion

To summarize, understanding the distinction between income tax payers and overall earners is crucial. The top 5 income tax payers may not reflect the top 5 overall earners. Factors such as economic changes, inflation, and job market shifts can impact these figures. For the most up-to-date and accurate information, it is advisable to consult the latest reports from the Office for National Statistics (ONS).

References

Office for National Statistics (ONS). (2023).

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