ACCOUNTANT EXPOSES: The UK Tax Regime Isn't Set Up For You To Get Rich
Vložit
- čas přidán 13. 05. 2024
- As a Qualified Accountant who worked in the tax sector for 10 years, I explain in this video:
- The UK income tax system including tax bands and the personal tax free allowance
- Why the UK Income Tax System is set up to incentivise investors and business owners
- Capital gains tax
- Company structures
- How the richest people (including Rishi Sunak and the Sunday Times Rich List Top 20) pay less tax
TIMESTAMPS:
00:00 - Intro
00:53 - The Income tax allowance
01:14 - Income tax bands and rates
03:40 - Why its hard to get rich through salary
04:46 - Investors pay less tax
07:00 - Businesses pay less tax
09:42 - Final thoughts
WHO AM I:
I'm Kiran, a qualified Accountant and experienced tax professional living in the UK. I make videos about finance, tax and investing.
MY FILMING GEAR:
Camera - amzn.to/3FxPlad
Microphone - amzn.to/3RP1GOu
Tripod - amzn.to/3PVWRjR
DISCLAIMER:
This content, and the ideas presented in it, are for education and entertainment purposes only. Kiran does not provide tax or investment advice. The information presented does not consider the financial circumstances of any investor, and therefore may not be suitable for all investors.
Although Kiran is an Accountant, no Accountant-Client relationship is established with the viewer in any way.
As an Amazon Associate I earn from qualifying purchases. The product links in the description are affiliate links. This means if you choose to buy something through one of these links, I may receive a commission on the sale, but it makes no difference to you as a buyer.
Expanding on the example provided at 08:30 -
Please note this is a simplified example that has been used to illustrate the high level difference between salaried income and dividend income. It does not factor in NIC on salaries, or the tax free personal allowance for the first £12,570 of income received by a shareholder, or any dividend allowance.
The effective tax rate will further depend on the profile of the business (as well as how money is extracted.) If you require more information, please consult your accountant to understand the best option for your personal circumstances.
Thanks for watching :)
Dear Kiran, nice video and agree with most of the part especially tax system design to keep you in the middle. 50k threshold shows this exactly. US is the best example how it should be in my opinion. You shouldn't penalize people who wants to do more or earn more. Why should people do more? To pay more tax which people doesn't believe it's spending wisely. (Way too much people on benefit especially the ones that can do something but choose not to do so. )
I disagree with you about another things though.
You show and apple on the left side and then tomato on the right side and then you are comparing them.
LTD company owner pay less tax compare to employee who makes same amount of gross income? Are you sure about it?
Do it most effective way to extracted money from the company i.e. low salary, how dividend. You take all the burden to run company and then pay CT Tax and then take dividend if only you are profitable in the business, bla bla bla... Most business fail within couple of year, 80% doesn't see 5 years, etc. Why? Because it needs more effort compare to working in a company in any position for regular people.
I do believe that dividends are quite high in this logic, it supposed to be much more lower.
I think if people have the mindset that there is no benefit in being a director they will hinder growth in the economy. Entrepreneurs will be discouraged from putting themselves out there and they are the ones whom start businesses and create jobs and opportunities.
System needs a good overhaul as the few benefits of running a firm, I fear, are
Not enough to encourage people to start up businesses.
Obviously there are many reasons why people start a business but I am
Talking about pure start ups which drive the economy and create jobs
Super videos btw. Have subscribed. If your free some time I’d love to have you on my podcast or some sort of collaboration
Hi, can you please make a video on crypto tax for uk, thanks.
I'm favoured, $22K every week! I can now give back to the locals in my community and also support God's work and the church. God bless Americaa.
I am a newbie how do you suggest I get
one?
Alright thanks for the recommendation, but how do I reach her?
Well this is not my first time of seeing
her name on CZcams channel. I think
she's extremely brilliant and lucrative at
the same time....
Thave never heard or seen any of her
clients complain of lost.... I think she's
just too perfect
This is a spam message. Seen it everywhere. Don’t bother replying asking for help.
Nobody can become financially successful overnight. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals. you have to contend with inflation, recession, decisions from the Feds and all. I was able to increase my portfolio by $289k in months. You have to seek for help in the right places.
I think it's not always about fear, Sometimes realistic factors discourage people from reaching their goals in life. For instance, I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value
Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.
Glad to have stumbled on this conversation. Please can you leave the info of your investment advisor here? I’m in dire need for one.
My CFA ’Melissa Terri Swayne’ , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
She appears to be well-educated and well-read. I ran a Google search on her name and came across her website… thank you for sharing.
The UK tax system in a nutshell:
- Honest worker - Taxed to hell to prevent you from getting rich.
- Rich donkey - Can invest, start a business, etc to pay less tax, or set up an offshore account in a tax haven to bypass tax entirely, to get richer.
It's almost like working backwards.
Nothing stops the honest worker from investing. Or am I missing something?
@@recycle_your_money
You are missing a big thing or two.
Honest workers face multiple problems:
1. Lack of money to invest.
2. Investment works multiplicatively.
1. You should really read up on how close to the bone most people are living in. Tell me where they have money to risk in investments.
2. This is actually more important. The more you are able to invest, the more returns you get, which, you know, is logical, and tying in with point 1, people who have little or no money to invest will get less out of it.
You can't tell me an honest worker, let's say, earning £50000 a year, invests £25000, which is probably half their wealth, and gets double in return is ever going to catch up to a super rich donkey, let's say Rishi, who can afford to invest £10 million, where a single percentage point in return is more than our honest worker.
See where the issue is now? If you think the average honest worker can catch up to Rishi's wealth through investment, please enlighten me how that is done, because I really want to find out which investment bars out the rich from investing to give the average person a chance to catch up in wealth.
I'm not asking for "wealth equality" or anything ridiculous like that. Hell no to commie ideas, but taxing investments less than taxing productivity work is a ridiculous idea to begin with.
@@recycle_your_money true! Everyone could bypass the system. The trouble is with education. If you don’t know these things exist you won’t go for them. Also.. some require quite a bit of capital and skill. These things take time.
@@LiquidFlower I don’t mean bypass the system. I mean to invest legally. Then people’ll find out quickly whats on the other side. Putting money up to risk with a possibility of losing it all plus the headache that comes with it plus the tax. Trust me, many dont want to be on that boat.
Regarding the requiring a bit of money. Everybody has a bit of money. Even €5/week. Just about anyone can get Revolut, start buying €5/week stocks. They’ll see how much commission and tax they pay.
Someone told me in my early 20s, "The system's designed to keep you poor".....20 years later, he wasn't wrong.
The poor designed it that way.
Stop pretending you are poor
No wonder everythings on credit and finance in this country. From cars to holidays....
@@aminckone. I never buy on credit. Just because that option exists doesn’t mean you should go for it. It’s popular cuz it plays into your psychology of having something before you can afford it.
I lied. I bought my house on a mortgage haha. But who doesn’t.. the 5%
I like the way you explained that people who are working hard 40-60 hours a week for years on end, have similar lifestyles and access to resources through currency, as those who do not work. Most people dont discuss this
No Richy's IR35 has prevented that one. I've just closed my consultancy, I'd even saved over £70k to employ someone and rent an office. It's just not worth in the UK, engineering degrees, years of experience in R&D in robotics, MSc in rocket science, setting up your own company, inventions/ideas you want to develop, it's all impossible, shopping at ALDI and living like pauper is the only way, spending everything you earn just to get to work and back, that's Richy's way.
I know the feeling. Brexit ruined my business. 65% was overseas customers and now the import tax they have to pay has stopped them buying. Spent 10 years building my business and now have to claim working tax credit to survive. Hard to find employment anywhere when you’ve worked for yourself for so long.
I’m pretty sure there’s a ton of grants you can apply for. You sound like you should be doing what you’re passionate about.
You should srsly consider using your skills and knowledge and startup in Japan. They are looking for people like yourself.
It's not only tax - you try to get a mortgage/car loan as a business owner or self-employed person, the system is designed to keep you in the system, then taxes keep you down. I left the UK last week.
Really that's good. I'm getting depressed here. No privacy either.
Curious where you moved to and also how old you are.
@@LiquidFlower Over 50 yrs old and moved to the US.
When I was in Portugal, I worked in two jobs paid the same amount of tax. Total earnings were counted. Here in UK I worked in two jobs my other job was getting taxed 50% and I would get the tax return only during the return period. Now I am planning to leave the UK. I invest a lot, and waiting for my hard earned money and losing investment opportunities and potential returns is driving me crazy. Leaving UK for good. I thought this country was a land of opportunities and dreams, but it is a shit hole and wasting life in pubs and nightclubs.
Where you thinking of going?
Where are you thinking of going?
@@eduns123 middle east potentially. Potentially looking at somewhere in Africa as I've heard such good things
In a nutshell, if you live/work in the UK, anything over 100k just dump into a pension and retire early, that's the only way to avoid the mafia stealing all your hard earned money. Also try to invest as much as possible into ISAs, so again the grubby mafia don't tax the hell out of your savings. Compared to the US income tax system, the UK tax system can only be described as punitive!
I freelance under a limited company as well. While on contract the company unilaterally decided that everyone was now on IR35. All objections were met with "there's the door" (illegal but they were a huge multinational, so I guess it's ok when they do it). I had to switch to PAYE with an umbrella company which took income tax, national insurance and a whole bunch of other taxes related to apprenticeships and hardship funds because the umbrella company had more than X number of "employees" so we all had to pay our share of that too. While all this is going on I still have my limited company with all its operating costs and taxes to pay. The government treated me like I was an employee and an employer at the same time and some of that money was taxed twice. The accountant did a stella job of clawing back as much as he could but for some of it he said I'd have to take the double hit. I've always been a good financial planner so I could suck it up in the short term, but it really stung. Reform said they will get rid of IR35 so they get my vote on that alone !
useful video thou the last part, PAYE vs Dividends isn't quite the whole picture. PAYE part is missing the NI element (employee and employer), also the 0 band allowance and the Divi part is ignoring the Corp tax in the comparison vs PAYE. i.e. 19% + 8.75%
Thanks for this, a small nudge re income tax bands would be to clarify that in Scotland there are additional income tax bands than in England. Appreciate though that this may be too granular given that the pitch is for the broad strokes of tax, but perhaps worth a mention that there is a difference.
Thanks for the video. My wife did some temping using a limited company, which was great, looked like payments were coming in a lot higher but after corperation tax, paying a base salary of £10k to keep pension status and then drawing rest from dividents it worked out she lost more than 50% to taxes and would have been better off just being paid normal salary.
Very difficult to avoid the system without already having money in the first place.
Can’t agree more. That was very evident that corporation tax + dividend tax = more that salaried tax. For small businesses there is not tax advantage and all the risk. Only multi million companies can write off expenses, company buyout etc.
Thanks for watching! The 'effective' tax rate can be lower for owners of limited companies. It all depends on how the money is extracted, and the profile of the business, and mine was of course a high level example. Thank you for sharing your experience!
I have listened to several channels, but I finally found you here. Your explanations are very clear and easy to understand!
Thank you so much for watching - I'm glad you found this video helpful
This is the best video, hands down, on the subject. To the point and so much covered in it. Great work, Kiran.
Thank you, so glad you liked it!
I am 66 and still working and paying far too much tax in the 40% band plus the VAT i seem to be working just to pay the tax,
Ltd company owner here.
Best thing I ever did. My effective tax rate is very low.
£12570 salary, the rest in dividends. Anything else stays in the company as cash or assets.
With the capital purchase write-offs, it's an excellent way to build wealth.
Very simplified. Earned a subscriber. Keep it up. Are there any reading your recommended buying to gain a vast understanding of the topics/technical terminologies you spoke on that may be worth buying.
This is the most straight forward explanation on the tax system I have heard. Also are they not getting rid of dividend rates ?
great video, everything was articulated so clearly and at a perfect pace that was easy to follow.
Best not to work over a certain amount of hours, claim benefits and keep a simple life.
No wonder business are closing ...better off not working
Really? I'd love to see you "enjoy" a life on benefits.
16hours top on the books, rest cash in hand. life goal for brittens
Very informative 👏👏.I have just started my career as an account practitioner.I searched to gain some experience in accounting tax rates .I found your channel and it gave me all the clarity.Thank you so much .
Nice and clear Kiran. I'd like to see a discussion of how to hold personal investments in the most tax efficient manner - investment company, trusts etc.
Excellent video!
I am in the same field as yourself, and I am using Stocks & Share ISA to eliminate Capital Gain Tax entirely. Not only this, I am investing in an asset type that beats Bitcoin itself. For example, in the last cycle Bitcoin yielded just under 20x whereas the asset I am in yielded more than 10x of that of Bitcoin and zero tax, how wonderful is that!
Once again, thank you for your video that is informative for Joe Public. And I must say your accent is so clear and concise it is reminiscent to an accent I found on another channel on CZcams.
Best of luck with your channel, and I have subscribed to your channel.
Hi, could you expand on what methodology your using with the ISA and what asset your talking about? Thanks
I have been self employed most of my life. Well until I broke my back and I'm not working right now. But while working I claimed for everything including washing my clothes. And when buying things I put almost everything through my expenses.
That is a very helpful piece of content. As an expat living in the UK, I really appreciate it.
❤❤❤❤ I Need more! Please 🙏🏾
Your delivery, structure and clarity was perfect to digest n simple enough to follow, with no jargons! ❤❤❤❤ I need more please! Great editing as well from your camera man n effects! Salute 🫡
Thank you so much for watching, and I am glad the explanations were helpful!
This is all true, but still only scratches the surface. Once you've got your salary you will be forced to pay more tax, e.g. VAT and all sorts of other charges. And then there is a nasty chain of socialistic redistribution where you're forced to pay "fair" salaries to all sorts of bureaucratic structures producing nothing but headache for everyone. And this is another process that drives the same process of averaging people into a mid-low-class mass. This system is especially hard on single-earner families and basically forces both family members to go to work.
Gary's economics explained how the normal distribution is by design to prevent wealth inequality, the fact that there's ways out of it with assets is what's causing wealth inequality and strong bias towards those with the assets accumulating more and more etc.
Why cant everyone buy more assets?
Thanks Kiran clear and easy to follow advice. I just subscribed! ❤
Thanks for watching and subscribing!
Thank you Kiran, please make a video about stock/forex day traders, how they are taxed in UK.
With high inflation, the tax band should have been moved up to match the cost of living. This has not happened.
Indeed. It’s even got a name: fiscal drag.
Exactly
With all due respect, everyone knows or should know the UK tax system is designed to take as much from you as possible, even ceasing to exist doesn't save you. Inheritance tax has to be the most disgusting tax going
Excellent video. Great points articulated with conviction. Well done Kiran. I'm subscribed!
Let's move on from the topic for now. I'm more interested in how you explain things. You find a good balance between keeping it concise and clear. Thank you for that!
Im from Brazil, moved here 2019, I have Italian citizenship, so I was able to stay before brexit finish, at first everything here is so much easier, I can have a brand new iphone for £40 with unlimited data, groceries have great quality and are cheap, is more expensive to do groceries in Sao Paulo than in London, clothes are cheap, perfumes are extremally affordable, I need to work 6h to buy a chanel perfume my friend back home 2 weeks, WATHAVER, reach a point, I dont need anything anymore, I already have a good phone, few perfumes, clothes, I want more, maybe my first property? then I realize there is a glass sealing in this country, even if I saved every penny I earned, ate baked beans everyday, shared a room with other 3 and pay £200 in rent, have done way more overtime, I still not gonna have 20% of a flat in London, and thats turns me off my motivation to save, work more, I felt the whole 2023 stagnated, I didn't touch my savings, but I had no joy to save more, I worked less, spent more on unnecessary things...
Do you work as a fast food delivery rider by any chance?
@@ij1014 no, I’m a senior florist, pay is around 600/800week, but still far from a £500k flat in london
One piece of proof for your observations being spot on is IR35. For those unfamiliar, many middle-class contractors set up limited companies to access the same tax advantages that are afforded to the wealthy. IR35 was introduced in response to this which essentially attempts to separate how a middle-class director operates vs a wealthy director and subsequently allows HMRC tp tax the middle-class director as if they were an employee. The wealthy need the middle-classes to keep working their whole lives, they are no good to the wealthy of they become wealthy.
You know, I keep trying to explain this to people and I get hit back with "pay your fair share" by middle class 9 to 5ers. The vast majority of middle class workers do this to themselves and vote these policies in.
Amazing content! I just subscribed! looking forward to your next video.
Thank you for making this video. I have found myself falling into the World of learning about tax after my "side-hustle" took off. It is so good to see videos like this that spell these concepts out so we can get a better grasp of the lay of the land.
Would you be able to recommend a good book for people who are new to this and would like to become informed without getting to technical?
I hope you find this video useful, and please let me know if you would like more tax videos in the future!
I think more tax vedios about tax code will be helpful
Definitely 👍🏾
50k allowance wtf are you looking at?
20% is up to £37700 after that it’s 40% (straight off the gov tax page)
I think you misunderstood my video and the Gov website. No mention of a £50k allowance@@hybrid9mm
@@KiranKaurFinance I’m an idiot my bad.
I'm so happy I made productive decisions about my finances that changed my life forever,hoping to retire next year.. Investment should always be on any creative man's heart for success in life
That's awesome!! I know nothing about investment and I'm keen on getting started. What are the strategies?
I'll advise you to work with a financial advisor.....Building a good investment portfolio is more complex so I would recommend you seek Fergus Waylen's support. This way you can get strategies designed to address your unique long/short-term goals and financial dreams .
Investing has proven to be an incredibly beneficial decision. My cryptocurrency profits continue to play a substantial role in growing my overall wealth, reducing my reliance on my salary
Wow! wow! please is there any way to reach his services?
He often interacts on facebook , using the user name
Kiran: That's a really good explanation. Thankyou for this. You've made my replay list
Loved the information in this video!. Thank you so much and keep up the good work!.
Deal in cash is the best answer for most of us
I never understood taxation until I watched this video, briliantly explained.
You mean robbery
Jus what I needed to hear, you got a avid subscriber 🎉🎉🎉
Thank you for putting this together! Really appreciate the insights
Glad it was helpful!
If the Government stops spending our taxes on their friends/CEO's through Government contracts, we and our services would be much better off.
Having to work for a month and practically be taxed a week's wages, is a joke.
🎯 Key Takeaways for quick navigation:
00:00 *📊 The UK tax system is designed to prevent individuals from becoming rich, but legal strategies can help reduce tax burdens.*
00:41 *💰 Income tax in the UK has three bands: basic rate, higher rate, and additional rate, with rates increasing as income rises.*
04:15 *📉 Taxes and benefits aim to push most individuals into a middle distribution, limiting extreme wealth or poverty.*
04:43 *📈 Realized capital gains and dividends offer lower tax rates compared to earned income, benefiting wealthier individuals.*
07:01 *🏢 Operating as a company owner can significantly reduce tax liabilities compared to being an employee.*
09:48 *💼 Reducing reliance on traditional employment by exploring other income avenues, like equity shares, can help build and retain wealth.*
Hmm😪
@@adedayofajemisin4767 Whats wrong?
First time watching now subscribed. Straight forward easy to understand content. Thanku ❤
Thank you!
Thanks for the video, it was really interesting!
Could you please do one where you dive into the tax you pay when working in your own company? I feel like this part is more complicated and everyone always skips straight over it
Thank you for watching and commenting! Good idea - I will try and include remuneration options and the associated taxes for company owners, in a future video!
You forgot to mention as a Ltd company owner you have to have your books audited by a chartered accountant and although their fees are deductible they aren’t cheap
How often?
Every year
Thanks for your comment. An audit of a private limited company’s annual accounts is not always required. See the audit exemption for more information.
I personally know several people who are on various benefits and haven’t worked in years. They are financially stable and have no intention of going back into work. I also personally know several people who work full time and are financially struggling. The UK tax regime needs a serious overhaul.
I know plenty that are on benefits (through no choice of their own) and are struggling. They "exist". They don't live. They would love nothing more than to get off them, but sadly not everyone can. They're not really a safety net anymore like they used to be. They're a tool for dividing society, used by politicians to get votes and turn us against each other.
Great video, very informative. Thank-you! Looking forward to seeing more from you.
Thanks for watching!
Thank you for the information. Really helped me understand the system. But need to read into shares and dividents on how they work. Thank you again.
Glad it was helpful!
Remember.... Dividend income is taxed on the already taxed income from corporate tax. Effectively you pay more tax on dividends than salary.
The UK tax system is that you pay tax, nino, council, and VAT! All of these are 65% of what you earned. Thank you
This video was brilliant! You are an excellent educator. I wish I had known this 20 years ago.
Thanks for putting it in plain words! I tried the salaried life and buying a house but I still felt poor. I’m starting a limited company soon but worried about all the extra services I now I have to pay for due to the complexity of all the rules and systems..
All of the UK's tax rules should occupy no more than one side of a single of A4 paper, with absolutely no fine print. Then there will be zero tax loopholes for the rich to shaft the poor with.
I agree and also scrap vat and just make income tax 35% and tax corporations and business in a fair way. Give business tax breaks for investment hopefully this will grow and when sold they pay capital gains.I just want a fair system to provide for our public services we all need. Lack of investment in UK plc that's why my gas bill is almost £600 so far for 2024. Some fat cat getting rich and not paying there fair share
Paying corporation tax first and then dividend tax after is actually worse than income tax. If you don't have many expenses, you are worse off having a company.
Kiran TYSM you demystified clearly and in simple language. 🙏🏽
Thanks Kiran, very useful information about taxes as an IT contractor using own limited company
I dont smoke myself but i see a pattern: poorer people tend to smoke (that's not a rule but in general) and poorer people tend to drink alcohol a lot (again, not a rule). Both of those items are highly taxed. I was with a friend recently and she asked me to buy cigarettes for her while she was in the bank. 15 pounds ++ for 20 cigarettes !!! I was shocked. It cannot be manufacturing costs because the exact same brand and type in japan is £2.80. And even in Japan there is a heavy tax on cigarettes.
They put up prices on things they generally don't want people to do, but historically its never worked (now your seeing an absolute prohibition of smoking in the UK for the next generation) they did the same with horses way back, but it didn't stop people using them, they are doing the same by having ULEZ. they try and outprice to make people consider better options, but it usually just leads to more poverty. what stopped people using horses I hear you ask? Cars! of course. just like vaping stopped people smoking traditional cigarettes its only when a new product comes out that people change the way they live. never from price hiking.
@@user-fy5xn1se5g 👍 agreed. My husband's mother is a smoker but also a doctor at the local general hospital. She will never give up smoking despite the price hikes and I think the government knows this. So people with plenty of money will continue despite the increase and poorer people will suffer.
Thanks for a well explained overview of the ripoff UK tax system. As April approaches, even worse changes are taking place for us in the middle people 😬 🙄
Brilliant video Kiran, clear and concise, please do more videos like this especially around tax planning and benefits of Pension etc. Help the small person fightback. Keep up the good work
Thank you! Happy to make more tax videos if they are helpful!
Interesting video and a lot of good info; I worked for 40 years as a salaried employee paying UK tax. One thing not promoted in this video is the fact that paying into an approved pension receives tax relief...I worked in a relatively highly paid industry paying into defined benefit and SIPP pension schemes since I was 20 years old, but for the last 10 years of my working life I rarely paid 40% tax. Each tax year I paid the maximum possible into my pension with tax relief at the basic rate, claiming the 40% band tax relief on my annual HMRC self assessment form. Retired at 58 with a comfortable defined benefit pension and around £450K invested in a global index tracker averaging around !0% per year still growing tax free. I have to limit my withdrawals to avoid paying 40% tax now I am retired...it all depends on what your definition of rich is.
Useful information. Important to know that the system is designed to maintain the status quo. Designed by the rich for the rich to keep the plebs busy worrying about paying bills. The whole state apparatus is designed for this not just the tax system. If you look around at the one's who have made it rich, it's mostly people who are not necessarily academic or hard working. The establishment who made the rules made it rich through might is right philosophy plundering from weaker people and countries then surrounded themselves with sycophants/protective layers in the form of class or caste systems along with rules/laws to prevent others from acquiring wealth the way they have done it. They have major advantages built into the system to prevent themselves from ever becoming poor. While they worry about becoming poor, the poor worry about not going to heaven.
It was all peaches and cream until the crackdown on solo business owners via the IR35 in the UK. this then limited peoples ability to contract and utilize the favourable tax rates of a business.
Thanks for this Kiran - I am now a new subscriber 🎉❤
Thank you!
Thank you for the easy explanation. Please, if possible, provide more examples for the beginners like me to grasp these kinds of ideas.
You can legally avoid many taxes. Example- I built a house using my own labour- which is not taxed (income or VAT) at all. Materials VAT free. When I sold it, I paid no capital gains tax (personal residence). £1M tax free, kerching!
YES ,hard work , done it twice before they put stamp duty on building plots , and mortgage free . ✌💣
Amazing!
Very informative ❤
Glad it was helpful!
This was really informative and helpful. Thank you.
Glad it was helpful!
Use of pension contributions to control tax bands and build capital growth potential a 3rd option. Also use of isa allowance before getting in to cgt planning)
Thank you for watching. Good points!
I’m afraid I rather disagree with some aspects of your presentation. The dividend tax rates are in addition to the corporation tax. So if we set aside the polemic issue of employers NICs, those working through limited companies and extracting their income by dividends are in a similar position to employees up to around £50k but above that, now find themselves paying considerably more tax than employees. So above £50k for an additional £10k of dividend, one is paying say 20% CT and then an additionally 33.75% of higher rate (40%) income tax plus dividend tax which works out around 47% marginal rate of tax. As an employee you would be paying 40% plus NICs which drop off to 2% above £50k so you are better off being employed.
But the basic premise of your piece about the glass ceiling preventing most people becoming high earners is bang on the money.
Thank you for watching and taking the time to comment! Great points, but don't forget tax deductible expenditure, the ability to control when you take money out of your business vs reinvesting it for growth and finally the eventual sale of your business which will be taxed more favourably. It depends on the profile of the business in question though!
Main thing to consider is the pay disparity between rich and poor… it’s ever bigger now so the only way to correct it is to increase taxing on super rich who exploit bottom earners and ease tax on lower earners
easiest way would be to raise the personal allowance to somewhere around 20K
@@user-fy5xn1se5g I've always thought the personal allowance should be the same as the living wage. I think that's around 21k currently
Hey Kiran - Literally just found your channel, and it Is awesome!! Not sure if possible, but I'd super interested to learn about inheritance tax and ways to avoid it! It's very topical for me! Also curious to see if you have any videos around avoiding bonus tax that pushes you into higher end tax brackets!
thanks a lot, I think your videos will be very helpful in my journey to have my own company and build wealth😊😊😊
Inflation is the biggest tax / theft from workers. Print money, give it to banks, devalue our savings, make us work forever.
Very useful information delivered with clear no jargon full explanation. Love it.
Great vid, short, sharp and concise.... Just started my own business as a sole trader some 18 months ago but the business has taken off, if it continues to grow at the current rate for the next few years, what you discribe sounds very interesting as I work hard for my money and I want to keep as much of it as possible. What I need to look into is how much more difficult is it to run an LTD with regards to paper work and time spent in managing the legal requirements of a LTD company??? Thank you for the information...
Worth looking at mortgage for a house soon? Not sure the rates will fall and rent is going up too. Also 2 year vs 5 year fixed mortgage for todays market?
Never wait to get into property. Over time it goes up. 5 year fix always.
But we don't need people to become middle class. Historically, those in the middle class have always been troublemakers. Revolutions have been led by the middle class: Lenin, Napoleon. Hitler was born into the middle class as well. Lower classes typically don't cause trouble, as they are usually focused on survival and don't harbor higher ambitions. Additionally, it's difficult for them to organize, as no one wants to follow someone from the lower class. On the other hand, the rich and super-rich don't have any interest in starting trouble, as according to the risk/reward ratio, they stand to potentially lose more than gain if they engage in risky behavior. Moreover, they don't have much to gain, as they already possess most of what they desire.
That is my conclusion. If you disagree, please let me know your opinion. I am open to others' views and may adjust my beliefs if persuaded.
There are some truths in your statement. However, the middle class is also the ones that helps create the balance in the economy, and also in the society in general that could lead to positive change. As you said, they aren't too poor to just worry about survival, not too rich to think everything is good.
I, however, noticed that from the explanation in this video: essentially it just sounds like communism? High tax bracket people pushed middle, low tax bracket people pushed middle. Like everyone is the same. Or rather, quite similar to the European peasantary economy that never evolves since the middle age. They are however, the aristrocats that rules of things, has the biggest companies, or land ownerships, and the rest of us merely living under them.
Youre bloody right mate. You’re not wrong in the slightest
Is there any recommendation you can give to payments received through contracts within ir35 contracts? Could your suggestions also be applied to these types of income?
Especially if they're automatically taxed as they're processed via the umbrella companies.
Thanks.
Good video Kiran thanks for the explanations
tax is automatically taken off on the payslip, how do one go about getting the over paid tax rebated?
Contact HMRC
www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees
Why did the prime minister only 23 percent on 2.5 million? Also the benefits that you talk about are very difficult to claim for the people who need them.
Could you make a video going into more detail about living on realised gains, and tax implications, and how much you would need to so do? :)
Hi Kiran thank you for the very informative video, it helps a lot of us who listen to your video about how UK tax work. If you do not mind me asking I am an employee and had an investment on stocks if ever I sold my investment does our personal allowance will still apply after I sold my investment? thank you very much. Cheers!
You just realized that now? It seeks to keep you dependent - and by extension, pliable.
Working class don't get taxed as much but they get taxed in the fatigue, injury and time it takes in recovering from a physically demanding job. If you have an easy you should thankful.
Very well explained, thank you Kiran 🙏🏼
Glad it was helpful! Thank you for watching
A very comprehensive breakdown in a brief time period. Thank You Kiran
Glad it was helpful!
The comparison you make at 8.30 isn't accurate. You call the 60k profit and then proceed to subtract expenses from it - it should be turnover, not profit. The taxable income is in fact what should be called profit. It's not a fair comparison in any case - if you have 22k worth of business expenses that money isn't yours, so even if you pay less tax because of it, you're still worse off in terms of money in the bank. Also it's not fair to compare dividend taxes to personal income taxes when you will have already paid corp tax on that profit before dividend tax applies. This kind of comparison can lead people to think it's more profitable running your own company when it's really not, at least not anymore - not at numbers like 60k. Also consider that VAT applies to businesses turning over 85k+, a tax which isn't payable by employees.
Thank you for watching and taking the time to comment. It was very a simplified example, and I agree with you that there many expenses to consider when running a company. However it can be the most profitable option for many people - of course it depends on the profile of the business!
@@KiranKaurFinanceSo does it mean that a higher earner would pay 25% in Corporation Tax and then 33% Dividend Tax? It would be almost 60% compared to 45% on PAYE. How does it make it better?
Hi there. It can be better, but this depends on the level of expenses that the limited company can deduct before tax, and because of the difference in NI on dividends vs salary. I didn't get into the detail in this video, but I would be happy to as part of a future video - I appreciate its not easy to see how the calculation works when adding up the percentages in my simplified example@@damian1690
@@damian1690was going to say the same question. At moment it is better to set up my online business abroad in a U.S. LLc state with no corporation tax and then just taxes on dividends - otherwise as a solo entrepreneur, I'm working all hours to give 65% to the govt!
@@KiranKaurFinance Yea, it would be perfect if you could explain it in more depth in your future videos, as I think it would be useful for many people, and not easy to get our head around ;)
makes me chuckle when they say we are "allowed" to earn 12k.
The picture is more complicated. Before anyone gets too excited aboit setting up a company. For example, surely your business needs to be growing and profitable beyond your usual employed work if the tax relief is to compensate for the loss of a more favourable employer contribution pension scheme. Your company needs to be achieving more than it would as just an incorporated version of a middle or higher (not highest) tax bracket income if this to be advantageous. And running that business is additional work on top of what your usual employed work would be, with additional risks.
Very informative. Currently looking to saving for my retirement. Pressed the panic button at 54 so looking at all different avenues to save. Thank you for this information 👍
Glad it was helpful!
Even if you run a limited company, taking 500k a year from it will attract 64.24% tax. I just don't see the UK as a viable option for commerce anymore.