Britain's Wealth Redefined: Why £100,000 Isn't Enough To Keep Up With London Costs Anymore

Earning a six-figure salary has long been considered a hallmark of financial success, but rising costs, inflation, and higher taxes are forcing many Britons to reconsider whether £100,000 truly represents wealth in 2025. The reality for high earners, especially those living in London, is that the purchasing power of £100,000 has diminished significantly over the years.

A Decline in Purchasing Power

A salary of £100,000 in 2000 would have placed an individual comfortably within the top 1% of earners in the UK. Today, that same income barely scrapes the top 5%, thanks to decades of inflation eroding the value of the pound. According to the Office for National Statistics, the median gross annual salary for full-time workers in 2023 was £34,963—less than half of £100,000.

In London, where living costs are among the highest in the country, the average salary stands at £44,370. Despite being higher than the national average, this figure reflects the premium residents pay for housing, transport, and basic living expenses.

Inflation Hits Hard

The Telegraph recently highlighted how inflation has impacted those on six-figure salaries. Adjusted for inflation, £100,000 in 2000 is equivalent to just £53,600 today. This erosion of value has made luxuries like private education and premium cars increasingly unattainable for many high earners.

For example, private school fees have risen to the point where they consume a significant portion of a six-figure salary. Similarly, a new Mercedes-Benz, which cost around £50,000 two decades ago, can now exceed £247,000, according to recent reports.

Taxation Adds to the Squeeze

Beyond inflation, taxation has created additional financial strain. High earners face marginal tax rates as steep as 62%, and there is growing concern that the government may impose further taxes on this demographic.

This tax burden is one reason why some six-figure earners report feeling less wealthy than their salaries suggest. While they contribute significantly to public funds, many find their disposable income shrinking under the weight of taxation and rising costs.

Middle Classes Face Precarity

The struggles of six-figure earners are mirrored by those in Britain's middle class, where households earning between £30,000 and £60,000 are finding it increasingly difficult to maintain a decent living standard. A report from the abrdn Financial Fairness Trust highlighted how insecure jobs and high housing costs have led to growing financial precarity among middle-income families.

Donald Hirsch, a policy adviser for the research body, noted that one in three people in the middle fifth of earners are likely to fall to a lower income bracket within a year. 'It is people earning between £30,000-£60,000 a year, depending on the type of household, people who you would expect to be doing OK,' Hirsch said.

The report identified single parents and those in privately rented accommodation as particularly vulnerable, citing high childcare costs, student debt, and low job security as major contributing factors. One in four middle earners lack secure employment, and one in seven face insecure housing.

Broader Financial Pressures

For middle-income earners, the cost-of-living crisis has exacerbated long-standing issues. Housing costs have tripled since 2000, while childcare expenses continue to outpace wage growth. Pension savings are increasingly critical to retirement security, but the rising cost of living leaves many unable to save adequately.

Hirsch emphasised the need for government intervention, including measures to improve job security, boost tenant protections, and ensure rising wages are not offset by spiralling childcare costs. 'Being on a middle income does not make people secure,' he said.

Are Six Figures Still Wealthy?

The question of whether £100,000 qualifies as 'wealthy' depends on context. While it remains an enviable salary compared to national averages, it no longer provides the same financial freedom it once did, particularly in high-cost areas like London.

For households earning far less, the notion that a six-figure salary is insufficient might seem disconnected from their reality. However, rising living costs, stagnant wage growth, and high taxation are challenges that affect nearly everyone, regardless of income.