Why High Earners in the UK Find It Tough: An Examination of the ‘Henry’ Dilemma

Former Chancellor Jeremy Hunt sparked controversy with his remarks on social media last year, claiming that a salary of £100,000 was “not a huge salary” in his affluent Surrey constituency. His statements prompted widespread backlash, with critics labeling him as “out of touch” and illustrating a disconnect from the financial realities faced by many workers today.

This cohort of workers has been dubbed ‘Henry’, an acronym for High Earners Who Are Not Rich Yet. Many Henrys congregate on social platforms like Reddit to share their challenges, citing feelings of being overburdened and overtaxed despite their substantial salaries.

Research conducted by Killik & Co, a wealth management firm, revealed that half of UK employees earning more than £100,000 annually expected their salary to afford them greater financial comfort.

While it’s difficult to generate sympathy for individuals earning six figures, they often find themselves struggling with the realities of their financial situations.

The £100,000 Tax Cliff

The UK tax system can be particularly harsh on those earning above £100,000. High childcare costs add to the burden, as assistance diminishes for parents once one partner’s income crosses this threshold. As a result, someone earning £99,999 could find themselves in a better financial position than those making more.

Will Stevens from Killik stated, “There’s a prevalent misunderstanding that a high salary directly correlates with wealth. Today’s financial landscape does not always support that notion. Individuals earning over £100,000 face significant financial challenges, including a heavier tax load, diminished eligibility for free childcare, and increased mortgage expenses.”

Once earnings exceed £100,000, individuals start losing their tax-free personal allowance of £12,570. For every £2 above this limit, they lose £1 of their allowance until it is entirely phased out at an income of £125,140.

This results in a marginal income tax rate of 60 percent for those making between £100,000 and £125,140, which can rise to 71 percent when factoring in a 2 percent National Insurance tax and potential 9 percent student loan repayments, leaving them with just 29p of every extra pound they earn.

The £100,000 threshold is calculated from adjusted net income, which includes pension contributions. Therefore, contributing the auto-enrolment minimum of 5 percent can allow a worker to earn up to £105,263 before exceeding the £100,000 mark.

Kate Flounders, who made £114,000 last year, found herself caught in the 60 percent tax trap. She earned £60,000 from her role as principal solicitor for a London council and the remaining £54,000 from her consultancy business.

Flounders, 44, has come to terms with her tax obligations but described the leap from £100,000 to £125,000 as a “hard hit,” likening it to being punched in the face.

Following her divorce in 2022, Flounders noted that managing expenses as a single person has become increasingly challenging. Her experience illustrates that despite income, financial pressures persist due to lack of financial support.

A household earning £50,000 each would benefit from tax relief on their combined income, but a single individual earning £100,000 faces significant disadvantages in terms of tax allowances.

Flounders expressed frustration about the high cost of living and increasing expenses for services like income protection and health insurance, adding, “I couldn’t survive on my £60,000 council income alone, and I don’t lead an extravagant lifestyle.”

Challenges for Young Families

The difficulties of being a Henry extend beyond taxes. Parents earning just £1 above £100,000 can forfeit thousands in childcare benefits.

Those crossing the income threshold lose access to the government’s tax-free childcare scheme, which boosts funding for childcare expenses by £2 for every £8 spent. It can provide a maximum benefit of £2,000 per child per year.

Additionally, families lose free childcare hours entirely once they exceed the £100,000 adjusted net income limit. Losing access to these benefits can have significant financial implications, particularly for parents with two children in daycare.

Research indicates that a small income bump over £100,000 could cost families upwards of £6,140 annually in lost childcare assistance.

Ultimately, these issues emphasize why many Henrys feel justified in voicing their concerns.

Ian Futcher from Quilter remarked, “While earning this level of income categorizes someone among the top earners in the UK, it also places them in a tax bracket that feels notably punitive. The threshold impacts disposable income and can deter further earnings.”

More Beneficial to Earn Less

Data from HM Revenue & Customs shows that many higher earners deliberately cap their income to evade the cliff edge.

Analysis suggests roughly 31,000 individuals earn £98,000, while an identical number earn £100,000. However, the number of earners jumps to 41,000 for those earning £99,000, indicating a trend to avoid breaching the £100,000 mark.

Futcher added, “We often observe clients making strategic decisions to stay below the threshold, utilizing methods like salary sacrifice or increasing pension contributions.”

This should not be necessary, as it restricts ambition and discourages progression.

Feeling the Pressure

Killik’s research highlights that Henrys not anticipating a substantial inheritance or lacking financial dependents often report feeling the strain the most.

A significant percentage of Henrys are financially responsible for their children, partners, and in some cases, even their parents.

Individuals like Simon Jackson, who earns around £120,000 a year, express the challenges of supporting his family while coping with high costs of living. He stated, “Hitting the £100,000 mark felt more like a burden due to the tax implications.”

With extensive monthly obligations, Jackson admits it can be a constant challenge to balance immediate costs with future savings.

Stevens emphasized, “It’s not merely the total income that matters; it’s the gap between what individuals earn and what they need to sustain their families that creates pressure.”

Ultimately, strategic financial planning becomes critical for high earners facing these tax and spending pressures.

Additional reporting by Jack Simpson