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Six-figure earners are living ‘pay cheque to pay cheque’

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One in four high earners on six-figure incomes are living “pay cheque to pay cheque”, a study has claimed.

More than a quarter (26pc) of employees earning salaries upwards of £100,000 said they had no money left at the end of the month, according to a survey carried out by wealth manager RBC Brewin Dolphin.

Respondents primarily blamed cost of living increases (90pc), as well as rising mortgage payments (38pc) and debt repayments (29pc). In London, 28pc of the 1,700 high earners polled said they were struggling to live within their means.

Carla Morris, a financial planner at the wealth manager, said: “The findings of our survey underline just how much the cost-of-living crisis has affected every section of society in the UK.

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“Even people who are among the highest earners in the country are living pay cheque to pay cheque, with almost all of them citing the rising cost of living as one of the main reasons for being in that position.”

Rising taxes have also adversely affected the highest earners in the country.

Prime Minister Rishi Sunak’s decision to freeze tax thresholds until 2028 has created a fiscal drag effect where individuals end up paying higher taxes as they cross frozen tax bands.

Mr Sunak lowered the 45p tax rate threshold from £150,000 to £125,140 in April, bringing hundreds of thousands more into the highest tax band.

The personal allowance – how much someone can earn before they have to pay income tax – has also been frozen at £12,570.

Once you earn over £100,000, the personal allowance starts to taper by £1 for every £2 over that threshold.

The loss of the personal allowance means those earning more than £100,000 can effectively pay a 60pc tax rate on a proportion of their earnings.

Those aged under 40 were most likely to be struggling, the research suggested.

Older adults may be less likely to have dependent children and more likely to have paid off their mortgage, easing their financial burden.

Ms Morris added: “While high earners aged 60 and over are perhaps not feeling the pinch as much as their younger counterparts at the moment, they are considerably more pessimistic about their financial situations next year.

“Rising costs will gradually begin to eat away at their income and, although the state pension will be protected by the triple-lock, other savings and the income they provide may be struggling in the current environment.”

Parents also lose vital benefits once their income hits £100,000.

If one parent in a couple earns over £100,000, they lose their tax-free childcare, which lets parents claim up to £2,000 a year per child.

The number of hours of free childcare they can claim also halves from 30 hours per week to 15 when earnings hit the £100,000 mark, costing them potentially £3,187 a year per child.

Mr Sunak is under pressure to offer more help with childcare costs and address rising taxes before the Autumn Statement.

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