Emeritus Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.

Many people in the UK on respectable salaries now wonder: “How can I earn this much yet still feel broke?”

Why?

• Rising living costs.
• Increased tax burden (especially due to fiscal drag).
• Growth in ‘hidden’ spending.
• Shifting lifestyle expectations.

Rising living costs

Part of the answer lies in the changing reality of living costs. A salary that once provided financial comfort now often disappears quickly into mortgage or rent payments, childcare costs, transport, rising energy bills, and higher food prices. Even relatively high earners find that far more of their income is absorbed by essentials before discretionary spending even begins.

Increased tax burden (especially due to fiscal drag)

Fiscal drag is becoming one of the biggest pressures on middle-income Britain. While wages have risen in cash terms, frozen tax thresholds mean more workers are pushed into higher tax bands, leaving many feeling no better off despite earning more. This policy began in 2021 and is due to last until April 2031 under current government plans.

There is a genuine squeeze on disposable income, and unless tax thresholds rise significantly, the pressure is unlikely to ease soon.

Growth in ‘hidden’ spending

There is also a growing problem of ‘hidden’ spending. Many households now pay for a long list of small monthly costs almost automatically – streaming subscriptions, mobile apps, finance plans, delivery services, and online memberships, among others. Each payment may seem insignificant on its own, but over time these regular outgoings can add up to a surprisingly large share of monthly income, often without people fully realising how much they are spending.

Shifting lifestyle expectations

Lifestyle expectations have shifted too. What were once considered luxuries – regular foreign holidays, upmarket mobile phones, multiple streaming subscriptions, or frequent dining out – are now viewed by many households as normal parts of everyday life.

Years of weak wage growth relative to general price inflation have eroded the security once provided by professional salaries. Those earning ‘good money’ are facing the prospect of not being able to afford a lifestyle they have come to expect.