Damien, loving the content as always. I'm sure you will have seen that Nest are looking to add 30% bonds to their Sharia fund. This will have major impacts on people in this fund who may have no choice to move etc. Can you give your insight on this development please and any possible routes people can take? Thanks. Much love.
Such a refreshing approach to responsibly presenting information. The way you present information, acknowledge the possible biases, and then quite neatly break it down in a methodical fashion, is absolutely spot on.
Hi Damien, just want to say i think your videos are pretty spot on, no bs and let us know what we need to know, keep doing what you’re doing, helping more than you can imagine👍🏽
How about we talk about the true rate of tax for everyday life: Income tax National insurance tax Road tax Council tax Value added tax Fuel duty tax Sugar tax AND MORE!
Private health care or insurance as NHS doesn't work, that's a big one for me, considering I should get that from nhs it more annoying than other taxes as it's free on a paper.
@@nathenleelewis car parking, a tax? hahahahha. you're dumping your car in a public space, and think of the cost of that as a tax? Parking should be far more expensive for the damage it does to communities and towns.
Damien, as always, fantastic video! Your production quality keeps pushing the benchmark higher 😂I’ve honestly never been more intrigued to see how this new budget will pan out. It could be a challenging one, but there’s not much we can do about it, we just need to knuckle down and crack on!
Income tax National insurance "Employer's" national insurance Council tax VAT Insurance tax Energy tax Fuel tax Road tax I'm sure there's some more. I think most people will be surprised to learn they are losing over half their wages in direct and indirect taxes. I say wages because this mostly impacts employed working people on PAYE who pay higher rates of tax than other people and can't dodge any of it.
I have spoken to people at this before and they seem quite confused. But I would wager its probably more than half, once you consider stuff like public transport, dental care, student loans, and inflation. Honestly my salary sacrifice pension contributions will probably stand for nothing as well, given its 2/3k a year. The government will have cooked up a new way to shaft us, like with endowment policies and State Earnings-Related Pension Scheme in the 80's.
Income & NI contributions are not separated or NI ring fenced. All those revenues go into the same pot. .. So for a basic 20% taxpayer, their effective tax rate is more like 30% just from PAYE.. .. And ~60% for higher rate taxpayers..
Excellent explanation, I look forward to your review of the budget! Perhaps the Beeb or Sky could save themselves a fortune and just play your videos to the general public. Thanks and keep up the great work.
Another great video. I think it's worth reiterating something you briefly mentioned. The comparison of years is a great one but it's hardly fair. 20 years working in a labour intensive career surely can't be compared to 20 years of sitting on an inherited fortune, something that doesn't even require to be of working age or under retirement age.
The figures presented are aggregates. Based on a wide selection of salaries. .. ONS job is to collect data from across the country from all income brackets. .. This will slightly skew the data. .. So take ONS figures as a baseline but do further research for a more accurate picture.?
What's wrong with taxing all income (salary, capital gains, making a bit of money on the side) at the same rate. I lived in Sweden for 10 years and this is basically how it works there, very simple and very clear, pretty much no one has an accountant as it's so easy to do your own taxes, everything you earn counts as income and is taxed as such. This even includes tax on profit on primary residence. Though there is a scheme to defer this as long as you buy another property and then pay it when you cash out/die
Good idea but our country is too corrupt to implement such laws. We like very detailed and long tax laws so companies and their lawyers can use them to avoid paying taxes whilst the lower and middle class get shafted.
@@reheyesd8666 our whole economy seems to be based on financial services these days and it would all go away if simple clear laws/rules were implemented. No accountants, no lawyers!
Then you don’t understand inflation. Yes I could sell my asset for more money but the things I could buy with that money have also increased in value. Asset holders are protected from inflation, capital holders loose out to inflation. It is only the first spenders of the new money (the government) and pound denominated dept holders (the government) who benefits from inflation.
@@desbowman9497 that's true, but anyone who has debt is the first spender of new money, since it's the banks that print it. This includes the government but the government mostly transfer money rather than buy things. If you take a loan that's brand new money, if the BoE creates money for the gov that's brand new money backed by nothing. Asset holders borrow money against assets. Over 90% of the money is printed by commercial banks.
I see that more as protection rather than a benefit, yes I've made £60 grand on my house in the last 5 years but I'm going to need that 60 grand if I want to sell my house and buy a similar house today.
I think that one issue with taking a "number of years used to pay tax" approach is that not all lifetimes are equal across the income spectrum. While the inequalities in longevity aren't anything like those in income or assets, the sad truth is that the increases in longevity of recent decades have accrued disproportionately to those in the upper half of the income distribution. This means that those in the bottom half, who spend a similar share of their lives working to pay tax (so to speak), have proportionately fewer left for themselves. Moreover, when we talk about increasing the state pension, there are equity implications for those in the bottom half, who will see an very short retirement as a result and will be far less able to amass sufficient private savings to retire early.
Thank you!!! I’ve been saying this for years. People who are drug addicts and unemployed are a burden. I say cut universal credit and give it to small medium enterprises
100% agree in the reform needed in the CG tax. We each have one lifetime with which to earn money, yet returns from assets, which scale almost infinitely for the lucky few, are taxed lower. A shift towards the tax burden being more heavily on CGT than income tax makes things fairer for those without assets to lean on. And as one of those tech company employees with probably 7 figures worth of share options to my name, it’s really not in my personal financial interest to hold that opinion, but I think it would be the right thing.
Just putting replacement flat roof in my house and I’m going to be paying £800 tax alone. I’m paying loads of tax and I bet next week I’ll be stung again. Hate this government already. If they go further then I’ll hate them even more.
So your roof got more expensive due to the election result?! 😂 The conservatives already raised taxes and likely would have increased the burden on working people more than labour will. As I understand it, we pay roughly equivalent amounts of tax to the US and have much more to show for it.
Stellar job mate! I love your latest "macroeconomics" videos and their practical implications for us workers. Btw, one thing the video made clear is that regardless of what we make as workers (20k or 100k) we are just a big working class. Some might live a bit more comfortably, but richly or luxuriously. There is a massive wealth ceiling for all of us, and unless we create our businesses, we can't escape from the working class.
I’ve been paying tax over my whole lifetime, fairly and squarely. I have a rental property and I’ve always taken care of my tax returns. Why do I do this, its a complete waste of time?
It is a waste of time and money. And what lawful obligation do you have to sign a SA form declaring all of your income to the government? Where did you ever agree to that? You didn't. You only have an obligation once you voluntarily sign the SA form, agreeing to hand over your earnings.
Great video Damien. There is a lot of FUD in the press and from so called 'experts' at the moment and here you have laid out the facts and not pushed an agenda. Really insightful, thanks for all the effort this must have taken!
Great video touching upon the discrepancies between the average earner, lower earner and super rich. I would like to see you take this further and ask whether we’re paying too much tax (or perhaps not enough). I know this is a tricky one that depends on your view of the role of the state but things are so dire in the U.K. for the average person. We seem to be paying a high rate of tax but get little to show for it. I’ve heard media reports of us paying the highest tax burden since WW2 but we have to consider the unique outgoings we have as a nation now compared to then (welfare and health stand out as well as interest payments on our debt). We could also factor in inflation and judge whether the tax burden has actually gone up in real terms. Another thing is capital investment by govt as this is a big reason for private companies to invest in a country if the govt is showing that it’s a good place to invest. You need to have enough to crowd in private investment but not too much that the latter is crowded out. Personally I wouldn’t mind the rich paying lower taxes as long as they invest in the country given our poor salaries and productivity. I would also like to you to consider whether the things we pay for are truly value for money but I understand that this might stretch the topic beyond its original aims. Thanks Damo I really enjoy your content and as a fellow finance nerd can see how much work you’ve put in to making it a fair representation of reality.
I'm not someone who usually comments on videos, but have to say that the way you explain these things is really clear, and I think that if more decision makers, and even the general public, were to watch your content, that would be a massive help to the state of the country. I like how you're not coming at it from any kind of pre-conceived position; there are problems in the way things work, and you're looking for solutions without anyone being "bad" or "evil". Keep up the good work, and thanks for trying to educate.
What is unnecessary to one may be necessary to another, or just not understood. It's easy to take a very very narrow viewpoint and claim anything outside of it is excess/unnecessary/wasteful.
The recent wealth tax increase in Norway was expected to bring an additional $146 million in yearly tax revenue, per the Guardian. Instead, individuals worth $54 billion left the country, leading to a lost $594 million in yearly tax revenue.
Norway is already circa 44% tax revenue as a proportion of GDP for l year 2022, vs UK 35%. In other words, if uk tax was as high as Norway that would mean an extra approx 90-100 billion per year
@@alistairrobinson3865yeah, nut Norway has Better standard of living, if thier oil is running low they'll need to reduce that or face people leaving. Like the uk, the middle is taxed at an all time high and I'm off to the middle east
@@Jay-xr3sb don’t blame you for leaving, but had we taxed and invested sensibly like the Nordics the past 20 years UK would probably be a nicer place to live.
@@alistairrobinson3865 I agree on reinvestment, we just went austerity only, however Norway has oil money and many are in the EU. Brexit could have been beneficial but neither party is fit to take advantage, we've simple let in the wrong immigrants and too many. Ive realised the country is setup to provide cheap labour and keeping those with ambition squeezed in the middle. while we agrue between poor and middle class the power struggle is really btween old money vs new money/business.
Hi Damien, would you be able to create a vlog focused on the impact on your income tax rate when paying additional amounts into your pension. For example higher rate tax payer paying 10% of total income and or the benefit to tax in increasing this at varying levels?? Great channel always useful easy to understand content. 💪🏼💪🏼
1:50 that's about 300 sheets per day for one person? seems like a lot? Convert 590 miles to Inches: 37,382,400 inches Average Length of Toilet Paper Sheet (lets say 4 inches) 37,382,400 / 4 = 9,345,600 sheets Convert to Annual Usage: Over an average life expectancy of 81 years: 9,345,600 sheets / 81 = 115,378 sheets/year Convert to Sheets per Day: 115,378 / 365 = 316 sheets/day
You missunderstand - rich people arent leaving; THEY HAVE ALREADY LEFT! The GDP bump you are seeing are assets being sold. Make no mistake you will have to pay more taxes while services will get worse.
Thank you calm rationale explaination & common sense. You should be comms director on all this as they are terrifying the uk, markets, businesses a d economy!
4:30 I'm sure it goes without saying to your viewers, but I find this kind of language part of the reason people are confused about tax brackets. We have a marginal tax system. They are not paying 'close to 50% on their earnings' that makes it sound like all their income is taxed at that rate. Rather than just the amount within that bracket. Personal Allowance Up to £12,570 0% Basic rate £12,571 to £50,270 20% Higher rate £50,271 to £125,140 40% Additional rate over £125,140 45% The first £12,570 has 0% tax rate. (£0) The next £37,699 has a 20% tax rate. (£7,539.80) The next £74,869 has a 40% tax rate. (£29,947.60) Everything above this is now 45%. So if you earn 200K a year, only £74,860 will be taxed at 45% (£33,687). So your total tax on a 200K salary would be all the numbers in brackets added together = £71,174.40 (which is 35.58% tax on your entire income). The reason any of this matters, is I've heard people say things like: "Oh i don't want a raise, because then ill have to start paying 40% and ill be worse off" Even if your raise took you £1 into the next bracket, only that £1 would be taxed at the higher rate.
You are mistaken at the upper end due to the loss of personal allowance between £100k and £125k. It stacks up more like this when accounting for income tax and national insurance (tax but called something different): £25k salary tax and NI £3480.4 (13.9% effective tax rate) £30k salary tax and NI £4,880 (16% effective tax rate) £50,270 salary tax and NI £10,556 (21% effective tax rate) £100k salary tax and NI £31,443 (31% effective tax rate) £125,140 salary tax and NI £47,029 (37.6% effective tax rate) £200k salary tax and NI £82,214 (41.1% effective tax rate) In the UK income tax is skewed massively towards the higher earners which is not immediately obvious with the tax bands (0%, 20%, 40%, 45%).
I pay 36k a year income tax and about 4k in national insurance. Council tax is 3.5k. I spend £4000 per year on fuel, which is mostly tax. School fees is about to cost me 4k in vat per year. Don't forget 20% vat on most things you buy. If taxes increase, then how is this fair? I might give up work and retire early and stop paying into the system.
It's not fair but life isn't fair either. The reality is, society is aging and taxes mathematically must increase to help pay for all the old people to survive and get medical care. If you increase immigration you can offset this and keep taxes a bit lower.
@@nicolasgirard2808 It depends on the +ve or -ve productivity of the immigrants. I don’t accept that the increased taxes are to pay for retired people. I understand the skewed demographics but there are many other factors at play and mortality rates are increasing for the elderly.
Damien, could you organise an interview with Professor Richard Murphy on one of your videos? He's a British former chartered accountant and political economist who campaigns on issues of tax avoidance and tax evasion
In relation to your point on carried interest, even if you ignore the acquisition cost of the right to carry (which is usually negligible), there is one critical difference between carry and a bonus and it relates to time. When you get paid a bonus, it will almost always be based on the performance of the business over the course of the prior financial year. Bonuses might get deferred for a few months or even a couple of years, but for a European private equity fund, you can be pretty confident that no carry will be paid for at least 5-6 years (and potentially never, quite a few funds never reach carry). So it's a different proposition to a bonus because it generally requires input (i.e. investment of time) over such a long period. IMO it's much more similar to growth shares, which are actually taxed at a more favourable rate than carried interest (20% vs 28%). Interested to hear your thoughts.
Capital gains tax changes are not just affecting rich people but also normal guys who also invest in crypto.. currently it's having a different structure compared to income tax and I hope they don't combine this and kill this asset class investment
your doing a great job on here and i acknowledge your teaching is so good keep the good work going , spent so much on tax that am looking for ways to cut it off , is really painful ,when you give pack so much ,,,,
I would advise the counsel of a seasoned financial pro. It may seem expensive, but as the old saying goes - "you get what you pay for" "Expert solutions require Expert providers" - my mantra
Agreed, opting for financial advise can be a wonderful resource for getting your finances in order. At first-hand, I average 4 figure/month in dividends and my overall ROI just hit $550k. I only have 30 or so stocks with more of my investments in digital assets.
I wouldn’t mind if they increased the CGT rate, if they weren’t also lowering the personal allowance on both CGT & dividends. Why should I have the same tax rate for gaining a few hundred or thousand for the risk I took, compared to people with millions who own shares?
I am 60 years and want to invest in stocks, funds or ETFs. What shpuld be the best strategy? I dont need the investment rightvaway and can invest for let us say 10 years! Will be Obliged for any advice!
The important thing is to understand is that your government bill is no different to any other expense you have, other than you have limited ways to reduce it. Each family needs to ask themselves, are they getting value for money and can they move somewhere else that provides a better deal. The answer for most of the top 20% will be yes.
The UK has signed treaties with many other countries for any individual to avoid being taxed twice. These treaties specify where one will be taxed if they leave the UK . In many cases the person will only be taxed in the country they move to, even if they have income in the UK. The UK cannot just point blanc tax the ex pats anywhere in the world.
Something worth pointing out is that the 20ish years is time worked, as in slugging it out and being productive. Meanwhile the non-income tax is not time necessarily time spent working at all.
I am interviewing Paul the director on the Friday the 1st after the budget, he will be taking questions from everyone in the audience, so make sure you get any to me if you have any.
My mate has a just paid 100k for Vanuatu a citizenship a few years ago, he never has to pay tax ever again-- but most of my mates on road have never ever paid tax and make more then the average worker anyway
An interesting balanced video Damien. .. There is a conundrum for governments regarding taxes. .. On the one hand MPs have to be aware of public opinion on certain matters and so act accordingly. .. On the other side, want capital inward investment, entrepreneurship. And I agree there should be more lenient taxes upon start up of SMEs. .. The problem here becomes; how hard do we tax wealthy people without scaring them away, but also create a meaningful tax revenue.. .. Our current politicans are too biased towards the upper end of society, and always seem to favour the concerns of those high net individuals. Rather than the general public. .. The truth is, even just a small tweak in tax laws, requiring extremely higher earners paying just a bit more, would more than enough reduce the tax burden upon the rest of us. .. I do agree, in part, about a lower effective tax rate the extreme higher income for the extremely wealthy. .. Imagine a billionaire taxed at 20% like PAYE... That would be ~ 200 million paid in taxes. .. So it's clear, having a lower headline rate for the extremely wealthy wouldn't necessarily mean lower revenues. Mps just need ro have the intestinal fortitude to go after wealthy individuals just a bit harder.. block loopholes, limit tax free consessions
Thing is, when people use the argument that, "they'll leave," I've never heard anyone say, "so what, good, there's the door," and leave room for opportunities for innovators rather than vultures and opportunists.
Sorry if you think the video tone has been negative recently. I want to remain an overall positive force in finance but i wont just slap on rose tinted glasses and make everything fine and dandy if there are points that need discussing
It's mad that the UK government gives such enormous tax breaks through lower taxes on gains cf. income. The 10% and 20% rates of CGT for people who are paying perhaps 20% and 40% on their income is an absolute bargain compared to most jurisdictions.
It would be good to see how the figures include what tax payers get back in terms of the state pension. And also perhaps the individual cashback for child benefits, sick pay, nhs treatment, i.e. based on an average lifespan.
This just shows why isa’s are as important as ever for lower tax payers. Yes you may only be able to save a total of £ 20,000 into a cash or stocks and shares isa’s however it’s £ 20,000 that the government can’t get their hands on. Also a great and informative video hope you’re well.
The relief at death boggles my mind. In Australia, you generally inherit the cost base of the asset, and CGT is a subset of income tax. So if your Mum bought an investment property for $50k, and now its worth $2M, you're on the hook for a $1.95M capital gain. This is likely discounted by 50%, but that means in the year its sold your *income tax bill* increases by $975k (being 1/2 of $1.95M). The idea of being able to inherit at a current cost base, in the country that was historically concerned about perpetuities in ownership, is such a contradiction (from an outsider's view, at least).
And sadly the 30 odd people who accepted an interview request from the LSE are a self selecting group of those least likely to leave: these people virtue signal their tax. Elsewhere legal firms and financial advice groups report non-doms consulting on exit and exiting.
actually you can escape capital gains tax from the UK but you have to remain outside of the UK for 8 years. not commenting on if you should or should not, just saying
so i run a business, and my end goal has always been to exit the business. I've taken nearly 15 years of below market salary to grow and invest in my business. If the Business Asset disposal relief is scrapped, I will be gutted. I've employed nearly 50 people, grow my EBITDA, retained earnings, and invested them to one day sell out. If I sell out without BAD then I'm actually in a worse position than if I paid myself more, hired fewer people and grew less (and paid less tax, VAT, eNI etc etc). Also, 15 years in, I'm tired, I want to do something else with my life, now I feel I'm going to be stuck in this business for longer. It's a punch in the gut. Not expecting any sympathy, but just to give my view on it.
No, you would have paid more in tax and NI, and paid it sooner, if you had taken a true salary instead of accruing capital gains inside your business in the expectation that you would be practically exempted from paying tax on them. You have just been following a tax avoidance strategy for a long time and now face the prospect of the rules catching up with you.
@@AranJackson you didn't invest money, you 'retained earnings' i.e. avoided the tax liability you would have incurred on withdrawing profits because you wrongly believed exemptions would be in place forever.
We'll know enough about it on Wednesday, everyone going to be effected one way or another. Going by what's on social media, ISAs, Council tax single person discount, pensions reforms to means testing, pay per mile, Transition to Nationwide ULEZ clean air charges in every city, town and village... It goes on and on..
The real question should be about corruption and the efficiency in which the money the government gets from tax is being spent. Why is it as a country with some of the highest tax rates in the world we keep having the conversation of increasing taxes. What is the government doing that all this money is not enough?
Everyone should pay national insurance regardless of whether they can access it. Actually it should be rolled into income tax and thresholds raised for the bottom rung.
The problem with going after the super rich for earnings is that they are concentrated in a few sectors (finance, law, politics). If there's a downturn in those sectors, then it will disproportionately hit the national tax income. If anything, the UK has very generous tax free allowances which means that a smaller proportion of workers pay tax than other European countries. Both parties realise this, and are using fiscal drag to "fix" this
Which is not to say that the rich shouldn't pay more tax - just that there are arguments over how you define "rich". The balancing act is that rich people often invest in businesses (either directly or via buying index funds) and taxing them produces money for the government but also reduces money for investment. Tories tend to lean towards encouraging investment, Labour tend to lean more towards taxation. Let's see what they do
You present a really weird set of metrics. The primary meaningfull statistic is whether you contribute or drain in your lifetime. All else (age brackets, education, background) are secondary to that main concern.
As I watch your video, the things you say get more relevant to that basic simple point I’ve made. it doesn’t matter how much money you earn or how much money you pay in tax it’s what you are left with next to the real cost of living. Nice new car every five years couple of decent holidays every year decent standard of living nice new clothes all the rest of it.
@@DamienTalksMoney I think this is a central question, why should we be paying more in general, do we want a bigger bloated state, as that is all we seem to get from it, that and paying for ideological pet projects for the incumbent political party. 🙂
04:30 - Also seem to assume both partners in each household earn similar amounts. How would the 144k look for one earning 114k & the other earning 30k, especially if you account for the effective rates due to loss of childcare.
Yeah the tax traps that exists with multiple kids and a sole earner are really quite harsh Thank you so much for the generous donation I really appreciate it
you correctly question whether there should be CGT on gains that merely represent inflation (there shouldn't) but this also means the 7.2 years figure is incorrect as much of the lifetimes earnings are also the illusionary impacts of inflation rather than real earnings
We have a very unhealthy aversion to paying tax in the UK, we are trained to hate it, when really if invested properly it would improve our lives (like in the happy Nordics etc). Here are the countries that pay more tax than us in Europe, but in ascending order from UK 35% to France 46% GDP (OECD 2022) UK Portugal Slovenia Spain Netherlands Luxembourg Germany Greece Sweden Denmark Belgium Italy Finland Austria Norway France
