The Salary Calculator

Comparison of UK and USA take home

by Admin

You may not know that there is a US version of The Salary Calculator which calculates take-home pay after income tax and Social Security (which is like the UK’s National Insurance). I thought it would be interesting to see how much of their salary our American cousins get to keep compared with how much we get to hold on to over here. I used an exchange rate of $1.59 to the pound, and the 2012 tax rates for both countries, to create this chart:

Click the image for a larger, interactive version

As you can see, in most cases the Americans get to keep more of their hard-earned cash than we do. The top rate of federal income tax is 35% in the USA, and they only start to pay that if they earn more than $398,100 in a year – compared with 40% tax in the UK if you earn more than £42,475 and 50% if you earn more than £150,000. Also, Social Security is charged at 5.65% of most incomes, compared to National Insurance which is calculated at 12% (although only above income of £7,605 per year). You might have heard in the news some people saying that the 50% tax rate makes Britain unattractive for wealthy business people – this is what they are talking about – if you could run the same business in the USA and pay tens or hundreds of thousands less in tax each year, you’d think about moving – making any British employees you have redundant and employing Americans instead.

However, before you start packing your bags, there are a few other things to consider. Firstly, you can see from this zoomed-in version of the chart that if you earn less than about £12,000 per year, you actually get to keep more of it here in the UK than you would in the US:

Click the image for a larger, interactive version

Also, these calculations only include federal income tax and Social Security – most of the states charge separate income tax on top of what the central government takes, which The Salary Calculator doesn’t currently work out. Another consideration is that in the UK we can rely on the NHS to provide us with healthcare if we need it either for free or for a relatively small prescription charge, but in the USA health insurance can cost thousands of dollars per year.

Also, it can be difficult to get a decent cup of tea.

You can read more about US tax rates on The Salary Calculator (US).

Tags: 50% tax, April 2012, dollar, Foreign Currency, foreign exchange rates, income tax, Jobs, national insurance, Pay As You Earn, pound, tax rates, The Salary Calculator, united states, us

16 Comments to Comparison of UK and USA take home

1. 

   Most Americans in those top tax brackets take large mortgage interest deductions, thereby significantly lowering their federal adjusted gross income. This and other deductions available in the US but not in the UK would push those lines much further apart.
David on January 25th, 2013
2. 

   As a Brit living in the US now I can confirm that my takehome pay is significantly higher here than it would be if I earned the same salary back home. Plus I live in Texas so there’s no additional state tax to pay, my company provides excellent health insurance, and the company pension plan + 401K actually adds up to more investment in my retirement than the company pension plan I left in the UK.
   I guess I’ve been lucky on the benefits package I receive as I know a lot of others in the US don’t get anywhere near the health or retirement benefits I do.

   None of these benefits every truly outweigh the lack of a good cuppa though.
Lucy on July 14th, 2015
3. 

   I’m a Brit and have lived in US for 34 yrs. I left a job in UK that offered 20 days paid leave and cushy hours. I came here and took various unskilled jobs that had no health insurance and offered one week of UNpaid leave after a year! I was fired from a job for asking for two weeks off to visit UK, saying they couldn’t hold my job open. If you have a degree and a good job with benefits, you will keep more of your money in US. However, if you work less than 40 hours a week at any unskilled or semi-skilled job, you will not receive health benefits, and that’s if they are offered. Americans work long hours and take short vacations and in my opinion do not have as good a quality of life as Brits. I intend to move back one day.
Sue Russell on October 24th, 2015
4. 

   Sue Russell. Things have changed here in the UK in the last 34 years dramatically! Unskilled and even semi skilled people are working full time hours plus to get by. Many people here are exempt from benefits and sick pay. I am working around the clock living with people with disabilities which I get free rent..otherwise would need to work 70 plus hours a week hard work.
Mel on December 16th, 2015
5. 

   This tax comparison doesn’t look at the problem deeply enough.

   I employ several English people in the USA. Their standard of living in the USA is massively higher than the level they enjoyed in the UK. On good salaries, they live as only really wealthy people can in the UK.

   One lives in a $600,000 property with 10 acres of land 5 minutes from a large town with all amenities. He tells me that his effective rate of income tax in the USA is 11% because of all the permitted deductions. This property would cost over £2 Million in the UK – a sum he could never afford.

   Another lives in a large $350,000 house that is massively better than the nasty over crowded one bathroom ex-council house he and his family rented in the UK. He told me that the very best thing he ever did was to move to the USA.

   In the part of the USA where I operate my business, I have met many British people absolutely terrified that their immigration status might change and they would we forced to return to the Socialist paradise that is the UK.
Clieu on December 16th, 2015
6. 

   I will always pick the UK over the US any day. We have the NHS so I couldn’t care less how much I’m being taxed, I get free health care so tax me as much as you like.
Corey W on May 30th, 2016
7. 

   But this doesn’t include state income tax. Which 43/50 American states have. The UK has no regional income taxes.

   The UK does have a regional property tax (council tax) in the UK would fall between 1300USD and 3900USD, depending on the value of your home. Looking at property taxes in the USA, the average payer seems to fall between 1000USD and 3000USD depending on the state.

   Really if you look at how much better the public infrastructure is in the UK and how much more generous the social spending is, American taxpayers are getting doubly screwed.
Richard on June 10th, 2017
8. 

   What the article fails to mention is that state income tax in the US is deductible from your federal income tax and if you happen to live in a state without income tax, you can deduct a certain percentage of your income to offset state sales tax.
   Property taxes in the US run between 1 and 2 percent of the value of the home and, like many other things, they are deductible from your federal income tax. If you add the cost of health insurance to our income tax, my wife and I pay between 18 and 20 percent on a household income of around $430k (salaries are generally higher here and most goods are cheaper).
   We moved from Canada about 12 years ago and the difference in our disposable income was crazy.
Rich on July 12th, 2017
9. 

   Corey W. I love it. “Free” healthcare that you pay 3 times over for the cost of my premiums and deductible combined. At $66,000 a year income my effective federal tax rate is about 8.8% state tax about 2% and Social Security and Medicare about 8%. For a total tax rate of 18.8% figure in the cost of all medical expenses in if I used them all my total % would go to about 29%. I bet you pay way more for your “Free Insurance”
Ken on January 7th, 2018
10. 

    ‘What the article fails to mention is that state income tax in the US is deductible from your federal income tax and if you happen to live in a state without income tax, you can deduct a certain percentage of your income to offset state sales tax.’

    No longer

    https://www.washingtonpost.com/news/volokh-conspiracy/wp/2017/12/04/now-that-state-income-taxes-arent-going-to-be-deductible-will-states-switch-to-payroll-tax/?noredirect=on&utm_term=.82d4681ab37e
Richard on June 11th, 2018
11. 

    Also as the article described it wasn’t a true deduction. You paid your state taxes on your original salary, then pay federal taxes on your remaining salary.

    You still get lumped with paying two income taxes.

    That was the good old days though. Now you get the joy of paying twice with no deductions.
Richard on June 11th, 2018
12. 

    Ken-29% plus $400 monthly health insurance employer deduction plus $5000 health insurance deductible. And dont forget real estate tax $300 a month. Total of min $14000 to your 29% oh plus dental insurance plus vision.
matt loba on June 17th, 2018
13. 

    Ken, what you’ve said is pure BS. Last year, at Bernie Sanders’ town hall, he had a businessman on stage who, for his 180 employees, paid out $2.4million for their health insurance. Following that, I did a check and in the UK his national insurance bill would be a “mere” $200,000. A TENTH of the cost. The average American household spends $12,000 annually on healthcare. That’s more than most Brits pay in taxes throughout the year. The United States’ current system is wasteful in the extreme. Medicare costs FIVE TIMES the budget of the entire NHS and yet provides coverage to fewer people.

    Incidentally, it’s not other nations that have high tax rates. It’s the US that has ridiculously low “effective” tax rates, although several of those loopholes for ordinary people have now been closed by the Trump tax cuts for the wealthy. A nation needs money for infrastructure. It’s why I read of American infrastructure crumbling due to lack of investment. You’re the ones that keep saying “you don’t get something for nothing” while at the same time expecting the government to pay for things that you need but aren’t willing to pay for.
David Davies on April 27th, 2019
14. 

    While yes–our State does charge some tax—it amounts to less than $30.00 per month. We have nearly paid off our home–a 1580 sq ft 3/2 bath –the basic with a fireplace and 2 car garage & bonus room. It as with all other homes in our area has a block wall around the back. We paid a mere $72,000. for this home–Just north of Los Angles.I can be at the beach in 2 hours- the snow in 45 minutes or the river in an hour and a half. Yet not deal with massive populations. We pay only $25 to see our doctor IF we go. Have the $1200 deductible IF we need any surgery or hospital stays. That works out to sending a $100 per month payment to whom ever I would owe IF need be.Rather than having a huge chunk taken out of our pay–just in case. That is what our employer healthcare benefits are there for. Also was able to purchase 10 acres of land with it’s own well–for $20,000–within 12 miles of town. THAT is something very difficult to pull off in the UK. There is NOT enough TEA–to make up for such low prices. My Great Grandmother left the UK over 116 years ago. Came to the U.S. –married a judge–tho from what I am told–SHE ruled over that household.
Mimi Rose on May 8th, 2019
15. 

    Most of what has been said about the US is very true. I have lived and worked in both countries. The US is far ahead of the UK on any economic metric I can think of. I have worked as an employee and now employ people. Sorry to say this, the UK is like a dungeon compared to the US, unless probably you are on benefit in the UK or about to die.
Prince George on August 26th, 2019
16. 

    I’m seeing a lot of fantasy here. I haved lived in the UK now for 12 years, citizen as well. The US is great at the “nickel and dime” model. Sure you may have more disposable income but across the board for everything it costs more: Utilities, Mobile phones, property tax, Insurance deductibles, Cable TV, you need to own two cars or more because you have no mass transportation! I know Americans have an insatiable need to always be better or to justify why their “mousetrap” is the best. It’s not. I know first hand from the experience of living in the UK. Better schools as well, the British School system is miles ahead of the US and our kids aren’t getting gunned down in the hallways! I have found it cheaper living in the UK even London, we didn’t need to own 2 cars saving $20,000 or more a year! Keep your CheezWhiz and Guns, I’ll take Europe any day.
Edward Bentley on November 23rd, 2019