*Having multiple streams of income is a game-changer for stability. Relying solely on a job may not provide enough financial security due to high rates of tax, it is important to explore additional investment opportunities to surpass one"s expectation*
The first step in every successful investment is to establish your goals and risk tolerance, a task best undertaken with the assistance of financial advisor.
Don’t be confuse buying the dip in a bear market, with guaranteed future returns. Just because that company is down 60%+ from ATH does NOT make it a sound long-term investment. Make sure you’re investing in great companies. kudos to Judy Arianna
The utilization of after-tax money and tax-free growth makes opening a Roth IRA very advantageous. Through a careful guidance of my FA, I did not pay taxes on my withdrawals of $2.86 million when I retired.
I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.
Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Gertrude Margaret Quinto” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
I left 🇬🇧 because the tax system is punitive. My principal residence is now India, but I negotiated an Expat (net of tax) pay deal because I’m a foreigner. But my tax residency for investments is Singapore (my wife’s nationality) where the tax liability on capital gains is zero %. I’m pretty much priced out of Britain now.
Good points. I use dividends as they are taxed lower and same for capital gains. Never knew about the buy borrow die, so you die with loans outstanding, wow what a process, very clearly explained.
I was shocked when I started paying self employed tax in uk and on the tax form it said which tax avoidance schemes do you use ? What I can legally use a tax avoidance scheme and tell the government that I am avoiding paying taxes ! Absolute MADNESS !
Excellent video thank you. Very well presented. The other advantage of borrowing against your assets is that it reduces IHT as you only pay IHT on your net estate.
The continuously changing economic conditions in our society have made it necessary for people to find additional sources of income. I am a Data Scientist, but currently looking at the stock market to fuel my retirement goal of $10m, my only concern is the recent market crash. Do I stay 100% cash and wait for a bull market, or go ahead to invest anyways?
Agreed, notwithstanding my rookie knowledge of investing, I have a financial advisor who did the trick in a bit more than 6 months after a lump sum capital of $500k. I've made a fortune so far, and I'm now buying real estates, gold and silver as advised by my FA.
truly appreciate the implementation of ideas and strategies that result to unmeasurable progress, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
The missing component in buy borrow die is that you need a business or be making money with a service or skill to pay the loan off slowly, you do not want to be just paying off interest in case you need another loan which you will if you are funding your lifestyle through loans while keeping your assets right? Also, you will be taxed on that money you generate to pay off the loans.
I can’t see why rich people would want to live by these tax rules in the first place. Most would set up offshore companies and live as a resident elsewhere. Best way to save tax. Most millionaires are leaving the UK these days.
Absolutely that's what I've done. Look at JEPG monthly dividend if you want passive income monthly tax free. Obviously is has to be in a stocks and shares ISA. NFA
You can't even invest in a bitcoin ETF in the UK let alone put it into an ISA for retirement. What a joke. The best-returning asset on the planet and we aren't allowed near it.
I will be forever grateful to you, you changed my entire life and I will continue to preach on your behalf for the whole world to hear you saved me from huge financial debt with just a small investment, thank you Katherine Stewart.
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super.
She is my family's personal Broker and also a personal Broker to many families in the United states, she is a licensed broker and a FINRA AGENT in the United States.
Capital gains tax should be the same percentage as income tax or it wouldn't be fair. Governments always side with the rich because they, the law makers, tend to be rich so they benefit from lower capital gains tax themselves. Thanks you for your insightful video.
A system that has been created by all the uk political parties. Income tax+ NI mean it is very hard to become well off salary income. The middle class are squeezed hard. The only difference between the conservatives and labour, is labour squeeze until they pop!
@@denisotto348do you not have to live for seven years from the date of setting up the trust(s)? Great if you do. What do people with no family do when they have no-one to set up a trust for? Or am I thinking of the wrong system perhaps
@@MikePhillips-pl6ov 7 years is the amount of time that gifts to children will be subject to inheritance tax. Do check as I may be wrong. But gift within annual gift allowance at year 1 and you die at year 8 then no tax. Gift at year 1 and die at year 3 and they’ll tax it. Pretty sure. A trust is whatever it is set up to be and will vary depending on its purpose. Think of it similar to creating a new legal entity although various tax rules will interweave within this. For a trust you’ll highly likely need ‘good’ professional advice. I say ‘good’ because so many accountants and finance professionals are like one eyed kings in the land of the blind. Because they know more than the average person (with the average person being someone who avoids learning about money although it governs almost everything) then they can get away with mediocre and often poor advice and knowledge because who will hold them to account. See it with accountants working for small business a lot. Best bet is to google and read a lot and learn the basics at the minimum. Worth it in the long run.
move to a country that has no inheritance tax (IHT) if you leave assets to your children or grandchildren, such as Gibraltar, Channel Islands, Portugal. Italy has IHT but only at 4% the last time I looked. When you leave the UK which must be for good, sell your property and car, move your assets abroad and tell HMRC you are changing your domicile by choice to your new residence, you can keep the UK passport. I have a UK passport but resident in Portugal.
@@robertwoodhouse-bm7kt nice reply. A breath of fresh air seeing comments where we’re helping one another as opposed to people arguing. Nice to know that about moving domicile status. Thanks
Easiest and Street Wise solution if working for yourself is to: Form a Ltd Company. Create different classes of shares A, B, C. Hold at least 80% of the class A shares. Give the other shares B and C (non voting rights etc) to non residents. Pay yourself a gross salary of £12,000 per annum and dividends of £24,000 that keeps you at 20% tax. Pay the rest in dividends to B and C shareholders (on paper), draw out the cash from the company. If for some reason HMRC asks you where you received the money from, it was a loan from B and C shareholders. I do not recommend anybody trades as self employed or in a partnership. Always trade using an Ltd.
Actually you can be self employed and non dom... Live in a cheap region like Thailand and Malaysia. Run businesses located in UK with virtual addresses. No tax because you are non dom and source of funds are not from UK
Just into the 1%. Will die with $,$$$,$$$ in debt. Borrowing is tax free. I cringe when people say that being debt free is their retirement goal. Who deserves your money the most; you or your bank? Don't pay off your house/apartment etc. Keep it with max debt and let inflation and rising housing prices do your work. Fixed property is by far the best inflation hedge. 1/3 property, 1/3 annuities, 1/3 stocks. YMMV.
Hi. Thank you for the interesting video. Do the rich ever pay back the money (principal & interest) they borrow (with assets as collateral) ? If so, how do they pay back the loan ?
It's a blatetent loophole that should be closed. They should be able to borrow against their securities but when it's for personal spending it should be considered income. I appreciate it's probably more complicated than this statement but it's blatantly unfair if billionaires avoid paying a similar rate of tax on their income than regular workers.
Thanks - despite being fairly finance literate, I never actually understood how this works. So am very grateful for this explanation. One question - presumably the wealthy keep taking out new loans to cover older loans as they don't want to sell assets to pay off debt. And do they use dividends to pay off the interest payments?
She never answered your (quite pertinent) question which is strange and frustrating. I just asked basically the same question... "Hi. Thank you for the interesting video. Do the rich ever pay back the money (principal & interest) they borrow (with assets as collateral) ? If so, how do they pay back the loan ?" The loaner wants at least to receive the interest, and possibly some of the principal back...
I understand this loosely, but still can't wrap my head around how you pay the loan back? My conclusion is that you'd need to draw down from a Portfolio to make the repayments. So the "asset" would still have to be large enough to not shrink. Am I missing something?
Depends where the loan is taken from, most will charge interest but not require any repayments. If the value of the assets fall in value you can be liquidated.
@gazhilts53 The same question still applies. How am I paying anything back? Would I have drawn down from my assets? Makes perfect sense if you already have a stream of cash flow, but if not, you're drawing down from somewhere to make the re-payment.
@@MrAcky89 they just add the interest on to the loan amount. As long as the assets are rising in value no repayment is needed and even then, wouldnt repay the loan but buy more assets instead. Over time with inflation, the value of the borrowed amount will shrink and the assets will rise.
@relobmit Say I bought an investment house for 100k, when I sold it 10 years later it went for 180k, so I paid capital gains on the 80k difference. If instead I died and left the house to one of my kids It would be valued at the new value of 180k. So if they sold it a year or so later for 200k they would only pay CGT on the 20k uplift , not on the actual 100k uplift. That's what she's saying.
Salary income doesn’t require the taxpayer to take the huge risk of investing and losing everything and the stress that goes with that loss. 90% of new business fail, so there has to be an incentive for anyone to start a business, otherwise we’d all be communist govt employees with a tiny guaranteed state income for which hefty taxes have to be paid. So all the idiots that scream “tax the entrepreneurs that employ us with an income more reliable than the gain that entrepreneur makes”, are poor because they fail to understand this. Nothing ventured nothing gained. Or kill the golden egg laying goose and get all the eggs out at once… except there’s nothing there once the goose is slaughtered. That’s the big difference between private and state education. Understanding business, finance and how govt really works.
Does the individual taking the security backed loan not have to make regular payments towards the loan before they die, and settle the loan balance with the sold assets?
If the capital gain is postponed until death where it then becomes revalued for purposes of the estate wouldn't the heirs then suffer Inheritance Tax on the much larger estate?
There are ways of avoiding Inheritance Tax too, such as giving your assets to your children more than seven years before you die. Also, Capital Gains Tax is not postponed on death, it is avoided altogether.
Soo... the wealthy are getting loans with security that they essentially are not making payments on? No monthly instalment, no full term? How can these be considered loans at all? IR35 and related tax cases have already discussed the director loan type schemes (ok, not the same but certainly very similar of loands not being repaid) and concluded these were not loans. Surely a repayment scheduke and termination date are required to qualify as a loan?
Maybe they're waiting for a great reset or a collapse and hyperinflation to pay back 1 cent on the dollar... Kiran never explained the pay back method...
Nobody is talking about paying back the loan (borrow part) ... you need cashflow to pay loan interest and/or principal... So you still need income or dividends to pay interest. Anything I'm missing?
And the interest on the loans is cheap as they are asset backed. A couple of percent over base rate usually. Far less than the tax charge would be if it was income.
Cash flow is important. You do interest arbitrage by investing in stocks with low interest property or company loans. The margins are more than enough to cover you. In addition you can take out new loans every so many years. You just need proper money management - if you think the money in your account is "yours to spend" - things go south. I do this with 1/3 fixed property, 1/3 annuities and 1/3 stocks. Retirement starts with an additional $800K loan. Will die with $,$$$,$$$ in debt. Cash liquidity is so undervalued. Nothing is more important. Still many (most?) people say they want to be debt free in retirement. As if the bank needs your money more than you do.
Hi Kiran, This sounds great! Could i do this with my BTL property? I have significant equity in it. Who provides these security backed loans and are they available to normal people?
If you set up a Ltd company, the company buys the asset and pays you. Or, no loan, it owes you on paper after transferring the ownership ( stamp duty to pay), then take the rent tax free as the payment until paid. Take payment after that as dividends
Yes. If you break the Inheritance threshold , no if you don't. Buy a house for 200k and it doubles you would pay CGT if you sell it. Pass it to your kids when you die and its under the limit. No IHT and the clock for thier CGT is reset to 400k.
Best to live in your means. If you have assets lets just say they are worth 5 million just pick up a loan for the 1 million. A million pounds can get you to a lot of places and a good life.
The borrow part doesn't make sense to me. Unless you pay back the loan (with another loan?) you will have an ever expanding debt, and interest payments. You only pay tax once, you pay interest forever.
From my understanding, you don't ever repay the debt until the time you pass away. I thought of similar strategies but the interest rate and the compounding of debt scares me. To cover the cost of paying off debt on death life insurance may come to play.
i have the same issue with this "borrow" part. You still need income to pay down loan/interest... somehow all these "buy, borrow, die" videos conveniently avoid this topic
I do this. You never pay back the loans - only ever interest. Do the math: $2 mill property loan @3.5% after tax reduction (I'm paying a lot less but got lucky so not using that number), keep cash for interest payments the first 2 years if buffer needed, invest rest in stocks @8%. If you have the money banks will give you the best rates and superior conditions. I have a housing loan that works as a credit line. Every time I have extra cash in the bank the credit line - and interest - falls with that amount etc. etc.
The only people who pay tax are registered with the revenue or employed in a regular business thats registered with the ir. So how to avoid tax. Dont work for a registered business. Dont register a business. Done. Now you dont need to pay tax. Unless you show off about it to someone who pays tax.
Great video content Kiran. This tax avoidance tactic does have strong immoral qualities when super rich business owners pay far less % tax proportionately than middle class wage earners such as secreteries and other salaried employees.
Are they the immoral ones by doing what the system allows them? The working class and middle class are being squeezed extremely hard in the UK. I earn a good salary and because of the way the tax system works, my life wouldn't change massively if my wage doubled or even tripled. This super wealthy, super rich band who own all the assets would be paying a wealth tax.
Hey Kiran, if someone refinanced their mortgage and got new loan (because their home's new LTV is higher than prev) can they use rest of the money for personal things?
I'm against that strategy as it feeds into fractional reserve banking. Id rather have enough capital to buy assets outright like blocks of flats so I'm not at the mercy of inflation, and then I can pass on that freedom by NOT charging tenants stupid prices for rent. I hate central banks
Assuming that you have no high interest debt/s, put 20k in an ISA. The 60k & 20k are annual limits so do this year after year if you can. After that you can open an investment account and buy shares, bonds, funds etc where there is no limit.
Im sorry but in the first example you completely skip the part about how one would buy said assets. In some cases this comes from either stock owned (tech company founder) but in most cases its savings, ergo assets are still accrued via income. Feels completely backwards and all it says is that income tax is higher than dividend (not true everywhere). If anything it may explain exponential asset growth over time via compound interest.
Warren Buffet acts on this his whole life. Shares. Shares in companies where people work to produce stuff that won't go out of fashion. Rather than risk in wrong companies just get S&P 500 if your US only or Global 500 if you want to globally diversify.
@@LurchLures as an account, would you be able to set this up, for an individual, as tax efficient as possible, and as you’re buying shares to get dividends, I think you could set this up up as a commercial entity in a limited liability partnership
@@jschreiber6461 no, you do not inherent the debt - its a creditor loss. That's why you actually need a comfortable level of money to do this strategy effectively.
what about inheritance tax? if a family member gives me their house upon death don't I have to pay inheritance tax which can be up to 40%? As far as I know only private pensions are exempt from capital gains tax if it is passed on upon death?
Inheritance tax is still applicable! This video didn't cover inheritance tax but I would be happy to in future videos. In terms of CGT, usually, if an asset is sold during probate and its value increased since the person died, there is Capital Gains Tax.
@@KiranKaurFinance thanks for confirming. I read recently on the Financial Times that the super wealthy are liquidating some of their assets now as they think capital gains tax will be even higher for them with the new government. Most likely placing the cash into a pension as part of inheritance planning.
Literally, any attempt to explain the ''Buy, Borrow, Die'' strategy fails to explain how these loans are being re-paid and they always make it sound like wealthy people are getting free money, like here's 100 million from us and don't worry about it.
Really ? Don't think so ! So you have £10m in shares bought for £1m (BTW - not explained where this money came from in your video) so you have unrealised gains of £9m. You borrow £1m inclusive of interest etc. (to keep it simple). When you die, where is inheritance tax because HMRC will want £10m minus £1m (they will ignore the £1m used to purchase the items) and you'll be paying 40% of £9m. It doesn't just "disappear" when you die because you have to leave your assets to a beneficiary.
This is a misleading title, rich pay less tax as a proportion of wealth, although the examples you give means that are paying way more tax in absolute terms.
I have a great idea to make you rich . Open a bank , get a banking licence . Create false credits out of thin air , let’s call them loans and mortgages. Transfer the non existent credits of money to those who need loans and mortgages . Charge them 5% and more for decades on the money that never existed . What a scam eh ?
Not at all. It's just a system that allows people to pay the lowest, legal amount of tax. Many of the ultra wealthy give more to charitable foundations than they do to governments as they can better direct how their money is directed and spent.
when you have some money, you also will not want to pay 50% tax. I have a friend who just finished college and got a job - he was always like "ah taxes are nothing" and now he's like I DON"T WANT TO PAY TAXES - YOU KNOW HOW MUCH THEY TAKE????
The rich may pay less tax BUT they quite often take on a lot of risk and its also the rich that fund and do big stuff too complex for the average person. So not a complete gravy train for the rich. 👍
This is the problem with society, I have no control of my wages and tax, it's done at source, I can't say to my employer I don't want to pay tax as I would rather invest it. It should be the same for everyone. The rich can afford solicitors and accountants ensuring they don't pay their fair share of tax
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"This is the basis of how the rich pay less tax" I'd like someone to define 'rich', it's a term bandied around, yet many 'rich' people who earn a large income, are only a couple of pay checks away from being poor.
Watch the video, it’s exactly what she’s talking about! Rich folk aren’t those who are salaried (and spend all that money), it’s people who build assets.
I'd say >100million ($ or £) net worth. Lewis Hamilton, the Beckhams, Ed Sheeran, Taylor Swift, James Dyson etc. Unfortunately there is no definition of rich. as you point out.
If you tax debt, the cost of borrowing will increase and the waitress will never be able to get a loan to own her home, despite keeping the tips tax free...
*Having multiple streams of income is a game-changer for stability. Relying solely on a job may not provide enough financial security due to high rates of tax, it is important to explore additional investment opportunities to surpass one"s expectation*
To be honest, investing correctly today can save you a whole lot of stress in the near future
The first step in every successful investment is to establish your goals and risk tolerance, a task best undertaken with the assistance of financial advisor.
I'm new at this, please how can I reach her?"
Don’t be confuse buying the dip in a bear market, with guaranteed future returns. Just because that company is down 60%+ from ATH does NOT make it a sound long-term investment. Make sure you’re investing in great companies. kudos to Judy Arianna
This is not the first time have been hearing of this woman and her exploit in the trading world but have no idea on how to reach her>
The utilization of after-tax money and tax-free growth makes opening a Roth IRA very advantageous. Through a careful guidance of my FA, I did not pay taxes on my withdrawals of $2.86 million when I retired.
I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.
Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.
@@mikegarvey17Impressive can you share more info?
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Gertrude Margaret Quinto” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Amazing and brilliant work, Kiran. Your explanation of this advanced tax planning topic was clear and concise.
I left 🇬🇧 because the tax system is punitive. My principal residence is now India, but I negotiated an Expat (net of tax) pay deal because I’m a foreigner. But my tax residency for investments is Singapore (my wife’s nationality) where the tax liability on capital gains is zero %. I’m pretty much priced out of Britain now.
Good move 🎉
Good points. I use dividends as they are taxed lower and same for capital gains. Never knew about the buy borrow die, so you die with loans outstanding, wow what a process, very clearly explained.
Same but that's going to change when Labour raise the Capital Gains tax rates to match income tax.
I was shocked when I started paying self employed tax in uk and on the tax form it said which tax avoidance schemes do you use ? What I can legally use a tax avoidance scheme and tell the government that I am avoiding paying taxes ! Absolute MADNESS !
Tax Avoidence is fine, it's tax evasion that's illegal
Excellent video thank you. Very well presented. The other advantage of borrowing against your assets is that it reduces IHT as you only pay IHT on your net estate.
The continuously changing economic conditions in our society have made it necessary for people to find additional sources of income. I am a Data Scientist, but currently looking at the stock market to fuel my retirement goal of $10m, my only concern is the recent market crash. Do I stay 100% cash and wait for a bull market, or go ahead to invest anyways?
buying the dip is actually good investing, although for the majority, their investing solution can be found in specialized expertise
Agreed, notwithstanding my rookie knowledge of investing, I have a financial advisor who did the trick in a bit more than 6 months after a lump sum capital of $500k. I've made a fortune so far, and I'm now buying real estates, gold and silver as advised by my FA.
truly appreciate the implementation of ideas and strategies that result to unmeasurable progress, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
‘’Aileen Gertrude Tippy’’ is the licensed advisor I use. Just research the name. You’d find necessary details to work with and set up an appointment.
The missing component in buy borrow die is that you need a business or be making money with a service or skill to pay the loan off slowly, you do not want to be just paying off interest in case you need another loan which you will if you are funding your lifestyle through loans while keeping your assets right? Also, you will be taxed on that money you generate to pay off the loans.
I can’t see why rich people would want to live by these tax rules in the first place. Most would set up offshore companies and live as a resident elsewhere. Best way to save tax. Most millionaires are leaving the UK these days.
Insightful. Thanks for the video
The average person would currently be best placed to buy assets in an isa and then have the ability to take the dividends tax free or reinvest then
Absolutely that's what I've done. Look at JEPG monthly dividend if you want passive income monthly tax free. Obviously is has to be in a stocks and shares ISA. NFA
Wait until Labour change the laws of tax reliefs on pensions and ISAs
You can't even invest in a bitcoin ETF in the UK let alone put it into an ISA for retirement. What a joke. The best-returning asset on the planet and we aren't allowed near it.
The ultra wealthy come from wealth, that’s the easiest route to success, I’ve been investing in that strategy now for 5 years and it’s going well.
I will be forever grateful to you, you changed my entire life and I will continue to preach on your behalf for the whole world to hear you saved me from huge financial debt with just a small investment, thank you Katherine Stewart.
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super.
She is my family's personal Broker and also a personal Broker to many families in the United states, she is a licensed broker and a FINRA AGENT in the United States.
You trade with Katherine Stewart too? Wow that woman has been a blessing to me and my family.
I'm new at this, please how can I reach her?
I was skeptical at first till I decided to try. Its huge returns is awesome. I can't say much.
Blimey! What an eye opener Kiran! Thank you.
Capital gains tax should be the same percentage as income tax or it wouldn't be fair. Governments always side with the rich because they, the law makers, tend to be rich so they benefit from lower capital gains tax themselves. Thanks you for your insightful video.
question remains where do they take money from to pay regular loan installments ?
A system that has been created by all the uk political parties.
Income tax+ NI mean it is very hard to become well off salary income.
The middle class are squeezed hard. The only difference between the conservatives and labour, is labour squeeze until they pop!
Same worldwide
How do they get around inheritance tax when passing on their assets at death.
Assets in trust.
@@denisotto348do you not have to live for seven years from the date of setting up the trust(s)? Great if you do.
What do people with no family do when they have no-one to set up a trust for?
Or am I thinking of the wrong system perhaps
@@MikePhillips-pl6ov 7 years is the amount of time that gifts to children will be subject to inheritance tax. Do check as I may be wrong. But gift within annual gift allowance at year 1 and you die at year 8 then no tax. Gift at year 1 and die at year 3 and they’ll tax it. Pretty sure.
A trust is whatever it is set up to be and will vary depending on its purpose. Think of it similar to creating a new legal entity although various tax rules will interweave within this. For a trust you’ll highly likely need ‘good’ professional advice.
I say ‘good’ because so many accountants and finance professionals are like one eyed kings in the land of the blind. Because they know more than the average person (with the average person being someone who avoids learning about money although it governs almost everything) then they can get away with mediocre and often poor advice and knowledge because who will hold them to account. See it with accountants working for small business a lot.
Best bet is to google and read a lot and learn the basics at the minimum. Worth it in the long run.
move to a country that has no inheritance tax (IHT) if you leave assets to your children or grandchildren, such as Gibraltar, Channel Islands, Portugal. Italy has IHT but only at 4% the last time I looked. When you leave the UK which must be for good, sell your property and car, move your assets abroad and tell HMRC you are changing your domicile by choice to your new residence, you can keep the UK passport.
I have a UK passport but resident in Portugal.
@@robertwoodhouse-bm7kt nice reply. A breath of fresh air seeing comments where we’re helping one another as opposed to people arguing. Nice to know that about moving domicile status. Thanks
Easiest and Street Wise solution if working for yourself is to:
Form a Ltd Company.
Create different classes of shares A, B, C.
Hold at least 80% of the class A shares. Give the other shares B and C (non voting rights etc) to non residents.
Pay yourself a gross salary of £12,000 per annum and dividends of £24,000 that keeps you at 20% tax.
Pay the rest in dividends to B and C shareholders (on paper), draw out the cash from the company.
If for some reason HMRC asks you where you received the money from, it was a loan from B and C shareholders.
I do not recommend anybody trades as self employed or in a partnership. Always trade using an Ltd.
who are the non residents ? can you give an example ?
@@ir0n2541 Are you serious? Read between the lines and figure it out.
@@ir0n2541 Read between the lines.
Non res pay 30% tax from first pound.
Actually you can be self employed and non dom... Live in a cheap region like Thailand and Malaysia. Run businesses located in UK with virtual addresses. No tax because you are non dom and source of funds are not from UK
A great video Kiran. Some quality insights 👌🏿👌🏿
Great insight and you are awesome and a legend as well never forget your worth okay.
Whilst it's true that this would avoid capital gains tax, what about the enormous inheritance tax bill your heirs will be faced with instead?
pass them over as gifts?
If bought in a limited company, you have A shares and the B shares move up after your death to A shares, so no inheritance tax.
Just into the 1%. Will die with $,$$$,$$$ in debt. Borrowing is tax free. I cringe when people say that being debt free is their retirement goal. Who deserves your money the most; you or your bank? Don't pay off your house/apartment etc. Keep it with max debt and let inflation and rising housing prices do your work. Fixed property is by far the best inflation hedge. 1/3 property, 1/3 annuities, 1/3 stocks. YMMV.
Hi. Thank you for the interesting video. Do the rich ever pay back the money (principal & interest) they borrow (with assets as collateral) ? If so, how do they pay back the loan ?
It's a blatetent loophole that should be closed. They should be able to borrow against their securities but when it's for personal spending it should be considered income. I appreciate it's probably more complicated than this statement but it's blatantly unfair if billionaires avoid paying a similar rate of tax on their income than regular workers.
Thanks - despite being fairly finance literate, I never actually understood how this works. So am very grateful for this explanation. One question - presumably the wealthy keep taking out new loans to cover older loans as they don't want to sell assets to pay off debt. And do they use dividends to pay off the interest payments?
She never answered your (quite pertinent) question which is strange and frustrating. I just asked basically the same question... "Hi. Thank you for the interesting video. Do the rich ever pay back the money (principal & interest) they borrow (with assets as collateral) ? If so, how do they pay back the loan ?" The loaner wants at least to receive the interest, and possibly some of the principal back...
I understand this loosely, but still can't wrap my head around how you pay the loan back?
My conclusion is that you'd need to draw down from a Portfolio to make the repayments. So the "asset" would still have to be large enough to not shrink.
Am I missing something?
You don't pay the loan back.
@@gazhilts53 you have to make the minimum repayments.
Where is that money coming from?
Depends where the loan is taken from, most will charge interest but not require any repayments. If the value of the assets fall in value you can be liquidated.
@gazhilts53 The same question still applies.
How am I paying anything back? Would I have drawn down from my assets?
Makes perfect sense if you already have a stream of cash flow, but if not, you're drawing down from somewhere to make the re-payment.
@@MrAcky89 they just add the interest on to the loan amount. As long as the assets are rising in value no repayment is needed and even then, wouldnt repay the loan but buy more assets instead. Over time with inflation, the value of the borrowed amount will shrink and the assets will rise.
I wish I knew you 40 years ago dear, 😅🙏💰💰💰
Great video, but I don't understand where the uplift in market value comes from after the assets are inherited.
Inflation, Population growth, local area development… but inherited assets can also go down in value depending on the inherited asset.
@relobmit Say I bought an investment house for 100k, when I sold it 10 years later it went for 180k, so I paid capital gains on the 80k difference. If instead I died and left the house to one of my kids It would be valued at the new value of 180k. So if they sold it a year or so later for 200k they would only pay CGT on the 20k uplift , not on the actual 100k uplift. That's what she's saying.
Nice video
Like the honest learning
Salary income doesn’t require the taxpayer to take the huge risk of investing and losing everything and the stress that goes with that loss. 90% of new business fail, so there has to be an incentive for anyone to start a business, otherwise we’d all be communist govt employees with a tiny guaranteed state income for which hefty taxes have to be paid.
So all the idiots that scream “tax the entrepreneurs that employ us with an income more reliable than the gain that entrepreneur makes”, are poor because they fail to understand this. Nothing ventured nothing gained. Or kill the golden egg laying goose and get all the eggs out at once… except there’s nothing there once the goose is slaughtered.
That’s the big difference between private and state education. Understanding business, finance and how govt really works.
Does the individual taking the security backed loan not have to make regular payments towards the loan before they die, and settle the loan balance with the sold assets?
The interest on the loan is far lower than equivalent tax on a salary.
@@Bulldogridesagain Yeah, but where does the "pay back" money come from ? From the money borrowed ??? =)
@@assezzen194 they don't pay it back. It gets paid off out of their estate when they die.
A good book on this subject is- The Value of Debt by Thomas J Anderson.
Kiran. great blog but u didn't cover inheritance tax in yr discussion. it's not ad simple as u mk out. 🙏
Happy to cover inheritance tax in a future video if it would help :)
@@KiranKaurFinance interesting video you glossed over IHT and also stamp duty land tax
Yes please
If the capital gain is postponed until death where it then becomes revalued for purposes of the estate wouldn't the heirs then suffer Inheritance Tax on the much larger estate?
There are ways of avoiding Inheritance Tax too, such as giving your assets to your children more than seven years before you die. Also, Capital Gains Tax is not postponed on death, it is avoided altogether.
How do I minimise the tax I pay on a large redundancy payment that potentially pushes me into 45% bracket?
Excellent video. Keep up the good work.
I could be wrong but security banked line of credit doesn't exist in the UK??
Everyone should pay a fixed amount regardless of the income earned.
Soo... the wealthy are getting loans with security that they essentially are not making payments on? No monthly instalment, no full term? How can these be considered loans at all? IR35 and related tax cases have already discussed the director loan type schemes (ok, not the same but certainly very similar of loands not being repaid) and concluded these were not loans. Surely a repayment scheduke and termination date are required to qualify as a loan?
Maybe they're waiting for a great reset or a collapse and hyperinflation to pay back 1 cent on the dollar... Kiran never explained the pay back method...
Nobody is talking about paying back the loan (borrow part) ... you need cashflow to pay loan interest and/or principal... So you still need income or dividends to pay interest.
Anything I'm missing?
You can take new loan to pay old, based on increased asset valuation.
And the interest on the loans is cheap as they are asset backed. A couple of percent over base rate usually. Far less than the tax charge would be if it was income.
Cash flow is important. You do interest arbitrage by investing in stocks with low interest property or company loans. The margins are more than enough to cover you. In addition you can take out new loans every so many years. You just need proper money management - if you think the money in your account is "yours to spend" - things go south. I do this with 1/3 fixed property, 1/3 annuities and 1/3 stocks. Retirement starts with an additional $800K loan. Will die with $,$$$,$$$ in debt. Cash liquidity is so undervalued. Nothing is more important. Still many (most?) people say they want to be debt free in retirement. As if the bank needs your money more than you do.
Hi Kiran, This sounds great! Could i do this with my BTL property? I have significant equity in it. Who provides these security backed loans and are they available to normal people?
If you set up a Ltd company, the company buys the asset and pays you. Or, no loan, it owes you on paper after transferring the ownership ( stamp duty to pay), then take the rent tax free as the payment until paid. Take payment after that as dividends
Passing assets to heirs at market value means inheritance tax?
No, at moment of your death assets are evaluated to current market value, so no CGT will be paid by heirs, although IT might be paid if not protected.
Yes. If you break the Inheritance threshold , no if you don't. Buy a house for 200k and it doubles you would pay CGT if you sell it. Pass it to your kids when you die and its under the limit. No IHT and the clock for thier CGT is reset to 400k.
OMG this is outrageous.
Interesting. In Germany you or the inheriting person have to pay capital gain tax for stocks if you die. Then a 19% inheritance tax.
Best to live in your means. If you have assets lets just say they are worth 5 million just pick up a loan for the 1 million. A million pounds can get you to a lot of places and a good life.
it will give you 4 years, in the mean time assets should grow to 6.5 mln.
The borrow part doesn't make sense to me. Unless you pay back the loan (with another loan?) you will have an ever expanding debt, and interest payments. You only pay tax once, you pay interest forever.
From my understanding, you don't ever repay the debt until the time you pass away. I thought of similar strategies but the interest rate and the compounding of debt scares me. To cover the cost of paying off debt on death life insurance may come to play.
i have the same issue with this "borrow" part. You still need income to pay down loan/interest... somehow all these "buy, borrow, die" videos conveniently avoid this topic
@@dripcalc You can roll the debt as gov does. As long as your assets appreciate.
I do this. You never pay back the loans - only ever interest. Do the math: $2 mill property loan @3.5% after tax reduction (I'm paying a lot less but got lucky so not using that number), keep cash for interest payments the first 2 years if buffer needed, invest rest in stocks @8%. If you have the money banks will give you the best rates and superior conditions. I have a housing loan that works as a credit line. Every time I have extra cash in the bank the credit line - and interest - falls with that amount etc. etc.
@@michaewelina7983 exactly - sadly that does not work that well with gov debt as our gov never dies...
How do you spend stock options at a hotel or resort?? Or a car dealership???
borrow against them from the bank
The only people who pay tax are registered with the revenue or employed in a regular business thats registered with the ir. So how to avoid tax. Dont work for a registered business. Dont register a business. Done. Now you dont need to pay tax. Unless you show off about it to someone who pays tax.
Thank you for this
You only pay back the borrowing after you die ? You keep paying interest on that debt as well . Very risky
Close the loopholes and make them pay what they should. Is it one law for the rich etc. Evasion is a crime lets make avoidance a crime too !!.
Great video content Kiran. This tax avoidance tactic does have strong immoral qualities when super rich business owners pay far less % tax proportionately than middle class wage earners such as secreteries and other salaried employees.
Are they the immoral ones by doing what the system allows them?
The working class and middle class are being squeezed extremely hard in the UK.
I earn a good salary and because of the way the tax system works, my life wouldn't change massively if my wage doubled or even tripled.
This super wealthy, super rich band who own all the assets would be paying a wealth tax.
This is what makes lawyers and lobby groups so popular. They setup all of this. Then elections come and the people can quarel over the smaller issues
Hey Kiran, if someone refinanced their mortgage and got new loan (because their home's new LTV is higher than prev) can they use rest of the money for personal things?
That depends on the lender eg some will give a new loan for specific purposes like home improvement only, which reduces their risk
You can take offset mortgage which allows you to pay out money from mortgage, but it has higher rates.
I'm against that strategy as it feeds into fractional reserve banking. Id rather have enough capital to buy assets outright like blocks of flats so I'm not at the mercy of inflation, and then I can pass on that freedom by NOT charging tenants stupid prices for rent. I hate central banks
Brilliant 😊
thank you but you know i would move to a place were they dont pay tax i cant recall the name of city.
dubai
What if you already hit your 60k pension limit? are there any alternatives?
Assuming that you have no high interest debt/s, put 20k in an ISA. The 60k & 20k are annual limits so do this year after year if you can. After that you can open an investment account and buy shares, bonds, funds etc where there is no limit.
Why pay so much money into wheelchair wealth?
Death is like a capital gains tax reset switch (generationally speaking).
Good video
Im sorry but in the first example you completely skip the part about how one would buy said assets. In some cases this comes from either stock owned (tech company founder) but in most cases its savings, ergo assets are still accrued via income. Feels completely backwards and all it says is that income tax is higher than dividend (not true everywhere). If anything it may explain exponential asset growth over time via compound interest.
What type of assets to gain appreciation for long term
Warren Buffet acts on this his whole life. Shares. Shares in companies where people work to produce stuff that won't go out of fashion. Rather than risk in wrong companies just get S&P 500 if your US only or Global 500 if you want to globally diversify.
@@LurchLures as an account, would you be able to set this up, for an individual, as tax efficient as possible, and as you’re buying shares to get dividends, I think you could set this up up as a commercial entity in a limited liability partnership
@chrisanstis For the amount of money I have ISAs work just fine. I'm not an expert or a professional.
Will the person inheriting the assets have to sell them to pay off the loan and therefore pay capital gains?
Yes. And if the asset declines before the loan is paid they owe money.
@@jschreiber6461 It depend on asset, property owned in your name yes. Shares in trust no. Shares which are inherited will not have CGT but will IT.
@@jschreiber6461 no, you do not inherent the debt - its a creditor loss. That's why you actually need a comfortable level of money to do this strategy effectively.
I wonder why this isn't taught in most schools...
unrealised gains?
Was not explained well to how the debt is paid at the end????
what about inheritance tax? if a family member gives me their house upon death don't I have to pay inheritance tax which can be up to 40%?
As far as I know only private pensions are exempt from capital gains tax if it is passed on upon death?
Inheritance tax is still applicable! This video didn't cover inheritance tax but I would be happy to in future videos. In terms of CGT, usually, if an asset is sold during probate and its value increased since the person died, there is Capital Gains Tax.
@@KiranKaurFinance thanks for confirming. I read recently on the Financial Times that the super wealthy are liquidating some of their assets now as they think capital gains tax will be even higher for them with the new government. Most likely placing the cash into a pension as part of inheritance planning.
Good 👍 one hugs ❤
im not rich yet, but thats what im doing.
Literally, any attempt to explain the ''Buy, Borrow, Die'' strategy fails to explain how these loans are being re-paid and they always make it sound like wealthy people are getting free money, like here's 100 million from us and don't worry about it.
I've seen her sisters RUclips videos
What they do is they dont contract with the tax office bingo and there isnt any law that says you have to pay it if so show us the law
Do i pay captical gain on profits realized from an investment made using loan money ?
It depends, some profits can be offset by interest cost, but it depend on tax structure.
I feel royally screwed by the wealthy.
Great video & great looking too ❤
Really ? Don't think so !
So you have £10m in shares bought for £1m (BTW - not explained where this money came from in your video) so you have unrealised gains of £9m.
You borrow £1m inclusive of interest etc. (to keep it simple).
When you die, where is inheritance tax because HMRC will want £10m minus £1m (they will ignore the £1m used to purchase the items) and you'll be paying 40% of £9m.
It doesn't just "disappear" when you die because you have to leave your assets to a beneficiary.
What a very sad society we are living in. Why work to HELP other people when governments do this.
This is a misleading title, rich pay less tax as a proportion of wealth, although the examples you give means that are paying way more tax in absolute terms.
Nischa looks different in this video
Eight men now control as much wealth as the world's poorest 3.6 billion people, according to a new report from Oxfam International.
Thats because they're the 8 smartest amd hardworking people.
Most of the 3.6bllion unwashed are dumb and lazy!
And yet, all the jealous little haters insist we have a progressive income tax because it’s more fair. SMH.
I love your English accent
I have a great idea to make you rich . Open a bank , get a banking licence . Create false credits out of thin air , let’s call them loans and mortgages. Transfer the non existent credits of money to those who need loans and mortgages . Charge them 5% and more for decades on the money that never existed . What a scam eh ?
I’m a poor man, but for some reason, I really enjoying paying tax, I look forward to it each pay day🎉
you need to see a shrink
What an evil system built on greed
Not at all. It's just a system that allows people to pay the lowest, legal amount of tax. Many of the ultra wealthy give more to charitable foundations than they do to governments as they can better direct how their money is directed and spent.
when you have some money, you also will not want to pay 50% tax. I have a friend who just finished college and got a job - he was always like "ah taxes are nothing" and now he's like I DON"T WANT TO PAY TAXES - YOU KNOW HOW MUCH THEY TAKE????
Key to becoming rich is living on less than you earn and investing the rest
The rich may pay less tax BUT they quite often take on a lot of risk and its also the rich that fund and do big stuff too complex for the average person. So not a complete gravy train for the rich. 👍
FINANCIAL EDUCATION IS VERY IMPORTANT
PEOPLE SUFFERING THEY DON'T UNDERSTAND THE TAXES BETWEEN BUSINESSES AND EMPLOYEE
But my activists friends told me we can tax the rich?
We are on a donkey ride to hell
This is the problem with society, I have no control of my wages and tax, it's done at source, I can't say to my employer I don't want to pay tax as I would rather invest it. It should be the same for everyone. The rich can afford solicitors and accountants ensuring they don't pay their fair share of tax
AUGUST 2024
This is why we need to stop this two horse race for No10.
Both will do nowt for us Voters.
We need to make change so ☑️ REFORM UK ☑️ ASAP
🇬🇧Ⓜ️🇬🇧🤔🤔🤔🤔🤔🤔🤔🤔🤔
"This is the basis of how the rich pay less tax" I'd like someone to define 'rich', it's a term bandied around, yet many 'rich' people who earn a large income, are only a couple of pay checks away from being poor.
Watch the video, it’s exactly what she’s talking about! Rich folk aren’t those who are salaried (and spend all that money), it’s people who build assets.
I'd say >100million ($ or £) net worth. Lewis Hamilton, the Beckhams, Ed Sheeran, Taylor Swift, James Dyson etc. Unfortunately there is no definition of rich. as you point out.
Rich people who outwardly spend their cash wealthy people generally buy assets and are low key ndividuals, albeit live a financially free life
Tell me how to wreck a country by being rich!!
so why not just tax debt and let the waiteress keep her tips
If you tax debt, the cost of borrowing will increase and the waitress will never be able to get a loan to own her home, despite keeping the tips tax free...
What a scam.
Super poor