Easyjet pilot in The Guardian (re: pay)
 

https://www.theguardian.com/business...ays-uk-economy

interesting.

EasyJet pilot McKenzie, a father of three, has similar plans: he will soon trade his full-time contract for a part-time one and flip properties on the side.

“I’m a captain, and the only reason I’m still working full-time is because my pension pot is small, due to time abroad. I currently contribute the maximum £40,000 to my pension, but in a few years I’ll absolutely go part-time, like a significant number of my colleagues already have, to avoid paying an effective tax rate of 62% [including 2% national insurance, on income between £100,000 and £125,140 due to the loss of the personal tax-free allowance].

“It’s just not worth it to wake up every day at 3am to work in the job I trained for: I’ll have the same take-home pay as I do now – £5,000 a month – by going part-time and reducing my pension contributions.

This has been EZYs CPTs issue for years. Much more efficient to go part time start your own business on the side. Once again those that work hard and earn well are punished.

It’s not just EZY that have this problem. It’s across the board. It’s just not worth going to work when you’re handing 62% of it to the government.

Senior doctors are retiring “early” for exactly this reason. It’s therefore on the government’s radar. But they aren’t doing anything quickly about it.

As a group we tend to be fairly financially literate.

Majority of the UK aren’t. Case in the point is how many people opt out pensions, have never heard on an ISA, live their entire lives on a credit card.

A good number of people will be totally totally oblivious to the personal allowance trap.

As suggested above, he'll hit the current lifetime allowance fairly quickly with pension contributions like that, which is the same reason so many doctors are retiring early/moving abroad. Apparently, for senior judges neither the annual or lifetime allowances apply, I think they're one of the very few groups which aren't affected.

Ironically, I reckon lots of pilots going part-time will reduce supply and possibly increase pay and conditions as a result, which in return may result in even more pilots going part-time. I have a pipe dream that it'll be like the US where flying two days a week can get a narrowbody captain $250k a year!

This is a huge reason for UK GP and Senior Drs having to reduce hours to avoid crashing Annual Allowance, and leave pension schemes because of the LTA effect. The treasury were aware of this 5 years ago and have done nothing. Before dropping hours at one stage my effective marginal tax rate was 102%. And now, like many others docs, I’ve found something else to do. So emphatically not just an Aviation issue.

I cannot speak for the industry as a whole but I can talk for myself and the majority of people I know who are pilots and they are are completely fed up. Yes the flying is fun and we are a great bunch on the FD but none of my peers would recommend anyone being a pilot, I don’t know if this normal as I have never worked in another industry but it doesn’t seem right.

If you look at the potential risks to our career the remuneration does not stack up. I know someone who is on £500K a year and is in awe of our profession but in shock when I explain exactly what it entails.

Then what would they recommend? Find me another six figure job you can get into with no qualifications, the training is pretty easy and is more or less non competitive.

Ridiculous to say absolutely no one would recommend it, then why are they doing it themselves?!

£120k a year to schlep back and forth to Tenerife may not be the most adrenaline fuelled job but it’s 10x easier than making that sort of money in a normal job.

Easyjet's starting pay for FO's looks pretty low compared to other airlines.

Ok feel I have to put my 2p in.

As someone else mentioned where else can you earn 6 figures with such ease?

When I was training I was in an ok paying job, £45k a year 10 years ago. To get that 40k a year though I was putting in 50 hrs a week minimum. At least once a week started at 6am and finished at 8pm. My partner earns around the same as Cap at Easy and yes some days she barely does anything working from home but other days she can be in a business meeting at 10pm. If we go away on holiday she will get called at least once for something urgent.
Couple of doctor friends been in it 15 odd years and they are not on £100k. The stories they told me it sounds awful.
Bankers/Lawyers yes some bringing in some big £££££k but the amount they had to put in early on is ridiculous. Banking grad scheme often starting around £40k but 70 hour weeks are not unheard of. Works out at almost minimum wage.

Im not in LHS myself however having had a career before this is much easier. Don’t get me wrong there are negatives. Overall I love the fact you go do your work and once you close the door that’s pretty much it.

That's because they don't earn enough to worry about the personal allowance limit, and need their pension contribution now, to make ends meet, so opt out of the pension schemes.

Discussion about how well or badly paid the job is for the work involved - is completely missing the point; the pay is set by the market, and not wet behind the ears "aerosexuals" who would do it for free.

The fact is that captains go part time or quit altogether in huge numbers, and that is due in large part to the brick wall of tax (62%) when one goes above £100k (and partly of course, the frustrations, family disruption and deleterious health effects of the job). And due to fiscal drag and inflation, this is no longer a problem for just super rich hedgies (for trainers, even max pension may not be enough to drop below 62%). The country is simply creating a damaging shortage of experienced professionals with this punitive band of tax.

Overall, the core&trunk of the global pilot pool lives nowhere near the pleasant and enviable life settings you have. Such as owning a prime property, not needing to provide for the family, and not having the PIC responsibility on the job.

Please share more on how aviation works well for the smart and successful. What you are missing is that the rest of us are neither.

yet many on here would advocate a higher rate for the rich!

You can be sure that taxes wouldn’t be so high if MP’s salaries were £120,000 a year, instead of lots of expenses to keep the taxable salary down…

Well as you can see, it is completely counter productive - the Exchequer loses, (not gains) tax revenue from the money that instead goes into the pension, or is not earned/worked because the pilot reduces their hours so as to be below £100k. And the country consequently has a shortage of professionals (particularly if they instead decide to emigrate to a less punitive tax regime). You want higher than 62%?!!! - extracting nigh on two thirds is already arguably in the category of state expropriation/Marxism, and workers push hard against it. Ever heard of the Laffer curve? The absurd unfairness is that it drops back down to 45% above £125k.

To me it's fairly simple, you can't change the rules so you adapt to them. I'm going to keep loading up my pension for a few more years, then I'm going to move abroad and see out the rest of my career tax free until I get to the point I want to/can retire. Doesn't seem that complicated.

A fair point , but just picking up your things and moving abroad isn’t that easy for the majority of people (unfortunately)

Before we continue tearing strips off each other about pay, surely this is the nub of the issue, the “hump” one encounters between 100-125k; the point of a progressive tax system is that as you go up the income bands you consistently pay more tax, and the 62% is an aberration that exists as a result of a less than joined up tax policy. To me, retention of the tax free allowance but introduction of a 50% tax bracket would be a far more transparent and consistent system, but that’s a political debate that isn’t really for here.

If it were completely up to me I’d advocate taxing Centrica at the moment.

You'd imagine that quite a few MPs are encountering the 62% bracket, but yet it doesn't get smoothed out in the way it would with a progressive system. Oh silly me, of course MPs aren't normal tax paying people ;-)

What is the collective wisdom to avoid the tax trap?

Must admit it’s snuck up on me this year, first time earning £100K+.

Is it as simple as thus:

Earn £110K Gross…

…Overpay pension by £10,100, “taxable income” becomes £99,900.

Fill in a tax return to be relieved circa £6K in income tax?

Therefore disposable cash reduced in theory by approx £4K, but my pension has £10K extra and I’ve given considerably less to HMRC…?

Basically yes, or if your pension contributions are salary sacrifice (ie before tax) then your gross becomes lower in the first place

You could also lower your gross by things like buying a bike on a ride to work scheme or even now an electric vehicle, or look at some unpaid leave to get back under the £100k.

Hardly encourages aspiration though does it? Where did it all go wrong?

You're doing something seriously wrong if your pension only benefits £10K when you put £10K into it. You should be claiming tax relief so with employer's NI contribution refund added your £10K becomes more like £15K.
No-one should be missing the opportunity to get the government to add up to 50% to their savings!
​​​​

Backwards reasoning (but the correct conclusion)!
If you put £10k into your pension, don't give the government credit for gifting you money - they don't - it was your money, - it's just that you don't have to pay tax on it. In practice, if you pay into a SIPP from cash you've earned (ie already paid tax on), it's gets a basic rate tax refund top up within a couple of weeks, and then you'll get the higher rate refund (on the tax you've already paid) by doing an end of year tax return. Plus of course, the employer will contribute to a company pension - but all the same, there's no government contribution - all you're getting is a waiver from tax. The company can credit you with the saved employer NI, but usually they pocket that amount. How long the government give full tax relief on pension contributions remains open to speculation.

Looking at it, wouldn't it make sense for an employer to offer a DB scheme with fairly high employee contributions in return for a salary freeze for a couple of years? It dumps quite a bit of risk on the airline but it'd be a great way to retain flight crew.

​​​​​​For those in the LHS with childcare requirements, surely part-time is currently a no-brainer.

Owning a prime property?
Think you got wires crossed. Living in a flat is hardly prime property. Unfortunate family circumstances allowed us to receive an inheritance far earlier than I was expecting. Without that we wouldn’t have had a deposit for a property.

Of course I provide for family. My partner earns a tad more than me but I certainly not enough to have a single earning household.

Possibly this is being resolved tomorrow?

The way it sounds to me is that you lose your personal allowance at a rate of £1 for every extra £2 over £100.000. If you make £110.000 you you PA goes down to £7.570, and you pay 20% over (£50.270 - £7.570) + 40% over (£110.000 - 50.270). I don't think the other income tax bands change, just the PA becomes smaller, so the amount taxed at 20% becomes larger by £1 for every £2 raise, and the amount taxed at 40% becomes larger by £1 for every £1 raise, above £100.000. That would make it a 50% marginal (not effective, because it is only for the increase in pay...) tax rate. The effective rate for £110.000 would be around 30%.

https://cimg2.ibsrv.net/gimg/pprune....5608023a1.jpeg
Monthly pay increase £945
https://cimg1.ibsrv.net/gimg/pprune....98c17cece.jpeg
Monthly pay increase £612 Effective tax is 60%
https://cimg4.ibsrv.net/gimg/pprune....4c76ff0cc.jpeg
After £120k monthly take home goes up a bit more.

I was wrong, guess your government does double dip. Finally found it on the UK.GOV website. Losing some, or all the personal allowance also brings down the amount where the higher rate of 40% starts by that amount. And it does make the marginal rate 60% between £100.000 and £125.000. Crazy.
Effective rate for £120.000 is £40.460 (total tax) / £120.000 (total income) = 34%.

And there's the 2% NI on top, so effective tax rate is 62%.

please look up the definition of effective vs marginal rate.

Correct - the term is marginal.

The effect of very high marginal rates and fiscal drag, is that people reduce their productivity as they get pushed into this 62% band.
Net effect; so crewing want a day off worked for the DO payment - no thanks, ⅔ of it goes to Hunt, so what's the point. Or in my case, ten years of being pestered to become a desperately needed LTC - but again why work much harder to have little to show for it in the pay packet. At the macro scale, GDP suffers.

Plus the government lose rather than gain revenue on pay over£100k, because all of it goes into a pension. (At least now, the £40k contribution limit is gone, so maybe I will do training. Retirement is looking pretty sweet!)

I see the next (probable) government have vowed to reinstate the lifetime allowance but it’s fine if you’re a doctor (or judge), discuss.

is there grounds for a legal challenge there?!

You would hope so, If you’ve worked hard and saved hard to put yourself in that position then planning for retirement is guess work presently.

On what grounds, you don’t like it?