Thank you for that detailed answer. I agree with everything you’ve said.

Given that the hypothetical person would be £892 worse off (2.5% of their gross salary), does that mean that they would be in the red region of your final chart? That’s not implausible, but it suggests that someone earning the (mean?) average full-time wage is in the top 22% of highest earners.

This could be one of those unintuitive examples of averages, like the fact that 99% of people have more than the average number of legs.