Why those earning six figures are no longer rich

Feelings of wealth are more about our place in the social circles that we inhabit and less about hard cash, reports Katie Binns

Want to know if you are rich? Telegraph Money has a calculator that can help. Use your smartphone to scan the QR code on this page, and then pop in your salary, house price and a couple of other details and it will reveal how you compare to national averages.

Of course, these numbers are only part of the picture. The skewed nature of the UK’s income distribution means that within the top 10pc of earners there are both billionaires and those earning £60,000 a year – the latter being a group who may struggle to get a mortgage.

Recent polling by Redfield & Wilton Strategies found that despite being in the upper 90th centile for income, 60pc of Britons earning £ 80,000£ 100,000 say they consider themselves “about average” for income.

Academic Marcos González Hernando, co-author of Uncomfortably Off with Dr Gerry Mitchell, said that of the dozens of people in the top 10pc interviewed for his book, none said they felt wealthy. “Culturally, being rich is thought of in absolute terms not relative terms – we think of the Jeff Bezos and Elon Musks of the world – so there’s a certain distance with the term, even though we are all rich and poor compared to others.

“And because of very high earners’ social circles, it becomes a necessity to spend on school fees and so forth to stay a candidate to climb the corporate ladder – so their frames of reference become normal. The top 2pc on £125,000 have contact with the top 1pc (those earners on around £180,000 and upwards a year) in their workplaces and socially and will feel the difference – feelings of wealth come in that are less about the hard cash and more about the pecking order,” he said.

Most fascinating are the higher levels of the top 1pc, a super class of astonishing wealth.

The average FTSE 100 chief executive pay in 2022 was £3.91m a year, according to the High Pay Centre, for example.

“One man in (the lower level of) the top 1pc explained to me he never feels rich because all his money goes on the mortgage, school fees and, in his own words, a sensible German car,” says González Hernando.

It’s perhaps understandable why a relatively well- earning worker might dislike being put in the same bracket as people with exponentially larger earnings. In absolute terms, those at the 5pc mark sit much closer to the median income earner (£32,000 according to the ONS) than to the super-rich.

But it’s not all in our heads. The cost of living crisis and recent tax changes also reveal that £125,000 simply no longer stretches as far as it once did.

When the 45p income tax rate fell to £125,140 in April last year, analysis from The Telegraph showed that, after expenses, a £125,000-a-year earner can be left with just £1 for every £10 they make after taxes and basic outgoings.

This assumes student loan repayments, pension contributions of 8pc, a 25-year mortgage of £600,000 at the 4.25pc central Bank Rate at the time and childcare costs of £1,000 a month. And this is before household bills and other expenses are considered.

Stefanie Tremain, from the accountancy firm Blick Rothenberg, said if this particular worker received a £10,000 pay rise they would only receive around 35pc of their pay rise after tax and the same deductions as above. “If you factor in the inflationary increase in mortgage and living costs then it is likely that this