How Much Income Tax Do You REALLY Pay? (UK Taxes Explained)
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- Опубликовано: 16 сен 2024
- UK income tax is confusing and most people do not realise just how much tax they are paying on their income. Watch this video to see the UK tax system explained and EXPOSED in less than 10 minutes!
When people ask how much tax do I pay in the UK, they are often referring to income tax, however, they often forget about National Insurance.
UK employees also pay National Insurance tax, this is currently 13.5% for basic rate income and drops down to 3.5% for all earnings above the upper earnings limit.
Income tax explained is a popular search term as UK tax isn't as straightforward as it first seems.
The UK income tax rates are as follows:
- Basic Income Tax 20%
- Higher Rate Income Tax 40%
- Additional Rate Income Tax 45%
There is also a marginal tax rate known as the 60% tax trap, this applies to earnings between £100,000 and £125,000.
For every £2 earned above £100,000, employees lose £1 of their personal tax allowance they are effectively taxed at 60% on this part of their salary.
The personal allowance in the UK is £12570 and this is the amount that you can earn tax free.
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Not sure why we all have beef with this , somebody has to pay for the 100 billion welfare we pay out each year . Yep over 100 billion , let that sink in . (Haven’t included government pensions ).
FAILURE to force MULTI NATIONALS to cough up pain of removal of licenses..
Amazon
Costa
Intel
E.T.C
have left the high street uncompetitive..
You are paying THEIR taxes….
Somebody pretending to be you just sent spam to me with a WhatsApp number. Been happening a lot lately.
Then add VAT, IPT, council tax, road tax, fuel tax etc.
innit though
And inflation of 20% on it all!
Yep, good point, not to forget capital gains and inheritance tax.
Probably when all's done, you only spend 3% the rest is all tax.
Don't forget your carbon credits.
Correct, and these are taxes from your NET pay, which is even worse..
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How can I get to this expert
If we are being truthful to ourselves, just like the rich, taxes can be a big pain. Income tax, value added tax, property tax, etc. Paying taxes is good, but we could also create our own tax havens. I personally put my money mostly in the stock market, since its appreciation is not taxable, and then when I sell, I find ways to make the income non-deductible in taxes. I 'm currently sitting on more than $327k of cash, and I'm definitely throwing it in the market. Just thinking of how to not lose it all, since the market is red.
It upsets me how simple things like this are not taught in school, and then people complain about taxing the rich everyday, as though the rich should pay for their own ignorance. I have been doing the same thing myself, using the market to shield myself from the market. But I hate making mundane decisions, so I just invest through an advisor, making good profits, avoiding taxes, while doing very little work
So you’re simply not paying capital gains tax. Tax dodgers are just impoverishing everyone who is on PAYE
Imagine have a drink on NYE and thinking "every year I have to work for free until 10th August".
I own a small but successful gym. We have recently moved into a new VAT threshold. Previously we were on a Flat Rate scheme of 8.5%, and now, because we turn over more than a measly £250,000 per year we have to pay full rate VAT at 20%.
VAT completely and utterly FUCKS the gym industry. We have almost no costs to off-set against the VAT expense. For example, our monthly turnover is currently £30,000. £6000 of that goes to VAT, and we claim back approx £500 per month. I could employ another 3 full-time employees with that money, or give each of my existing staff a great pay rise.
Our Business rates are almost £1000 per month.
I am so angry.
How have we got here?
How do none of these politicians see that the current tax levels are a noose around this entire country's neck? Slowly throttling businesses and households.
The fact that we remain profitable is a miracle.
How can we fix this?
Our public services, that we pay all this tax for, barely fucking work.
Literally every industry complains about vat screwing them over. It's purposefully designed so mega corporations can pay no tax while medium business gets rekt regardless of what sector you are in. It's trying to force you to over expand or grow too fast to prevent you from becoming competition for existing corporations.
You don't collect enough VAT from your member subscriptions?
Mate, you need to look at turning your gym into a private members club or association. NOT A MEMBERSHIP AND YOU DON'T PROVIDE ANY PRODUCTS OR SERVICES. Clubs or associations offer privileges and benefits and all your equipment and the building and anything to do with it is held in a trust by signing a charter with one other or three other men or women. This way, you don't owe tax because it's not a commercial business.
Then add in the taxes on everything you buy..... It would be interesting to try to get some sort of estimate on that. Now there's a project 😊
@Don Secco that’s the biggie. They are stealing from us by stealth!
@Kurt Gencheff Yes I think it came out at 80% tax or something!
100%! Council Tax, VAT etc!
Apparently it is on average 95% if you include VAT, duties, council tax, employer's taxes, etc. You only get 5p for every pound earned.
Yes please do
I could even watch much of your video because I know you are correct, I have made these calcs myself and conclude the same and so am furious about it! When I mention it to my buddies at the pub they completely disagree and say we only pay about 30%. I believe we pay a crippling amount of tax in the UK by which I mean crippling to the economy and therefore everyone's prosperity. The vast majority of people either don't understand this or don't want to understand this. Tax should be drastically cut, and when people say well where will the money come from, I'm afraid that government spending must also be cut to match if not more.
It's easy to be negative about all this, but we're just in a big inevitable cycle so don't worry, just do what's right for you and family and be stoic. If you really want to do something, move elsewhere if that's possible for you.
Fuck that. Tax needs to go up. I’d rather pay tax than extortionate costs of everyday life where is no subsidy. Only winner in this game where you slash taxed will be the rich
@@Speedkam Well no... because it depends what you want. Otherwise, your argument could be stretched to why not pay 100% tax and let the government decide what is most cost effective for it's citizens to eat.
Stating the tax rate is totally misleading. If you earn £125k (which lets face it isn’t many people) you pay 42k in income tax and 6K in NI, making about 38% overall.
Vote reform 😊
if you wanna live on a farm, don't expect rights@@Speedkam
Self-employment is good. There are so many things you can write off against tax. Your 'phone contracts, land line, broadband, IT equipment, use of home as office and much more besides, depending what your self employment consists of. Many of these things you would have bought anyway but now they are discounted against your earnings if you use them (reasonably) for your business. My accountant earns his keep in this regard.
Worth mentioning the 'graduate tax' whereby workers are paying back their student loans and if you are on plan 2 may never even pay it all back before it gets written off. So total effective 'tax' is even higher than what was shown in the video.
Great video BTW !
It’s only a tax if it’s compulsory. If you decide to go to university who do you expect to pay for it?
@@lesleywillis6177 The problem with a student loan is 1/2 the people are never expected to pay it back. It's effectively a tax on those who do pay it back. A bit like John is paying for his and Tom's since Tom won't pay it back.
@@CaptainOgres there is interest on that loan. Buy waiting until its written off u may end up paying way Korea in the long run vs. Overpaying it.
@@lesleywillis6177 for middle to low income households, it’s the only way for them to attend university and improve their lives. So even if it isn’t compulsory, really for vast majority of students it is compulsory.
@@asfand5747 I am from a council estate, I didn't go to university but I can assure you we live very well. It's up to the individual to solve their problems.
I live in Scotland and they have this insane bracket where middle earners get punished really hard. At £43,662 your income tax rises to 41% but your UK national insurance rate stays at 12% (recently 13.25% of course!). This means you're paying an effective 53% tax rate until the national insurance rate drops back down to 2% at £50,271. So on that income you get taxed heavier than someone earning over £150k. It's been that way since they devolved income tax here a few years ago and I have never understood why they don't change this. With brackets frozen here as well it's brutal for middle income folks, who aren't exactly living it up nowadays with the cost of living.
Oh and I also have a student loan from university in England, so stick an extra 9% on that and you're staring down the barrel of 62% tax if your pay rise bumps you up into this overlap.
Total madness, but I never hear it talked about or addressed!
@@jamiewalkerdine3705 he said it was like that for years so why are you justifying this with inflation.
You can aviod all this tax if you are willing/have ability to contribute to your SIPP
Yeah we hear so much about the 45% rate but the 60% stealth rate is hardly ever mentioned by anyone. And with fiscal drag its catching more and more people every year.
And now 53% is about to become 54%! Glory Scotland eh.
It's done that way to keep the scum as scum!
I work a minimum wage job for government no point me trying to take courses and raise my wage at all...
Also, the top 10% of earners pay 60% of the U.K. tax revenue. That’s why you need high earners.
Great information Darren, everyone should be made aware of how heavily everyone is taxed.
@@jamiewalkerdine3705 Incorrect. Taxes are indeed one of the main forms of government revenue and the government has a finite budget of how much it can spend without getting into further difficulties in future years (by having to raise more and more to service it's existing debt). The government does not "print" money in this mythical fashion, it can sell bonds with a promise to pay a set interest rate in the future, but these bonds are then purchased by the bank of england or by private investors or institutions with the expectation of them making a profit. The government is still, in it's own way, limited to the budgetary constraints of private households even if it has different levers available to raise funds.
@@jamiewalkerdine3705 I've been thinking about this myself, and I agree with you. Government can effectively just print money to finance large infrastructure projects. There will obviously be an inflationary effect of this strategy, but large infrastructure projects will also increase GDP (in theory at least) which will offset the inflation somewhat. In a fiat system, the worth of your money supply is backed up by your GDP, rather than gold as in the past.
Effectively, this means that tax is not necessary to fund infrastructure, as surely if the cost of a project is greater than the economic benefit, then it should not go ahead. However, tax plays a useful role in guarding against poor estimates of future value. For example, an infrastructure project (say HS2) is funded through taxpayer money, for a total of £100B. Once it's built, if it turns out to only create an economic benefit of £90B, then we are not left in the uncomfortable position of being in debt. Conversely, if it turns out to create a benefit of £110B, then it will create a deflationary pressure on the currency, which will have to be offset through money printing.
If you were instead to issue new currency to fund infrastructure projects, tax would still be useful. Assuming that we are reasonably accurate in estimating future value, we will need tools to create both inflation and deflation to meet our targets. Issuing excess money is a tool to create inflation, while taxes could be used to create deflation. However, rather than using the taxes to fund infrastructure, the money would instead be removed from circulation.
These are my thoughts. I only did economics as a supplementary part of my engineering degree, so somebody who actually studied it could probably expand on this, or tell me why it's rubbish.
And it also shows that the high earners do actually pay!
I suspect a lot of those high earners are landlords and if we were being honest it is their tennants that are paying the tax, tho I could be wrong? I don't have numbers to back this up.
@@arkatub You think landlords don't pay income tax on the rent?
So for most wage earners, they take between 33% and 43% of your earned salary, then they take council tax, car tax, carbon tax, insurance tax, fuel duty and then another 20%VAT on everything you buy. So our real tax rate for most people is more like 65% to 75% which is utterly disgusting if you think about it. What the hell do they do with all our money??
Wars are not cheap
not to mention inflation stealing your purchasing power
@Western Propaganda Yes but making more money with no economic stability to back it up is good for nobody. Money used to be linked to gold but no longer. If more money was printed out of thin air and let it loose amongst the general public, supplies may not be able to keep up because people would have the means of buying more than they need. What would happen is that prices would have rise in order to control the flow of supplies to keep ahead of demand so inflation would have to occur because when the amount of money outruns the demand for it, it becomes less valuable. So less buying power to maintain control of supply infrastructres. Yes they can make more money if they wanted to as gold is no longer linked to money, but where they going to put it? Not in their pockets or ours, that would be stealing from the state or giving us the means to cause chaos as described above and eventually cause issues in supplies. They'd have to put it into circulation for the economy but money will still end up to be less valuable as the supply of money would be greater than the demand and we'll still be taxed to death. Could say taxation is legal theft so they can get a lot of that magic thin air money that was printed but in the long run, printing more than is in demand will benefit nobody. I get what you're saying, it would be great if money was never ever an issue but it'll never happen. Say one day, automation has taken over many primary and secondary industries and people are almost exclusively doing things like programming, medicine, egineering innovation, cyber security or basically anything that brings almost everyone into an environment that is today much higher paying, those kinds of jobs will become less valuable as almost everyone will be doing those jobs and people would still have to compete for the higher paying jobs in that situation. We might be happier because less manual labour, but the money wouldn't be as good.
They use the money for spectacular fireworks on NYE ☠️
Cocaine mate
The uk gov attitude is awful towards companies. I always thought those that start a limited company should have an incentive on tax breaks etc... as long as they employee people. They are putting their neck on the line, being entrepreneurs and employing people. That tells me the government like it as difficult as possible for people to become successful and tax the crap out of them. I ran a company for years, 15 employees give it all up to run a one man show and make similar profits. The admin, the hassle, I choose to close it down, it was doing good business but on a reassessment I could earn what I do now and not have the hassle of employees- if I had an incentive to keep going like paying less tax but keeping people employed I would have but I couldn’t be bothered and had to lay everyone off after 14 years. The UK trajectory for business and taxes is downward. The good times are done. Covid was the final nail in the coffin and now the global economy is on the brink.
@@jamiewalkerdine3705 who said anything about propping up? If an individual puts their neck on the line and creates jobs, there should be an incentive. But there isn’t. SME are the back bone of the economy. They should be protected not rinsed.
Makes me want to leave the country and take my productivity elsewhere. And despite all this tax, governments still borrow money and run a deficit. This is insane. Government have gotten far too big to the point its become a parasite on our lives. You also should consider that inflation is also a hidden tax levied on citizens as it results in government borrowing from central banks which erodes the value of our savings.
silence goy
No stay. Cease productivity.
Starve the fat cats. And then we build back once the rats have fled.
Time to get this nation back. One small step at a time.
The free loaders and greedy pocket fillers will vanish once they feel like there's nothing left to bleed.
I'm Yorkshire through and through. 2nd generation miners strikes. You stay, you grit through, you refuse their tyranny, and put the tools down. War of attrition.
We're used to having nothing in the North. London insists on keeping this class war running.
With this many people disgruntled, it's the best chance we have of forcing the elitest, victorian scum into submission.
They'll never break the Northern spirit. I don't need money when we have the hills and I'll die and starve out of sheer stubborness.
This nation needs to remember what "stiff upper lip" means!
SHUT IT DOWN @@shabbos-goy9407
and the more they borrow, the more of those taxes raised they do not even get to spend as a larger percentage of the taxes overtime go to service the debt. Currently over 10% of government revenue goes to that, more than 110bn a year.
On top of this, you still pay council tax and VAT. Looking at VAT alone, in the first tax bracket alone, you pay 53.25%.
This is why those who don't pay council tax, (probably as they are two people already paying) should pay via the Tax system. Landlords should be required to declare the number of people living and registered at a property.
We wonder why an ever increasing number of people have decided to just not bother!
If there is anyone who has decided to not bother, they are mugs as they have less money in their pockets. Loser attitude.
You mean tax is high as we have to.pay for lazy people
@@SK-kh2rs Lazy government"
@@SK-kh2rs
We’re taxed on everything and would be if the whole nation was working, we pay for the ambitions of those in government and people on benefits get the left overs.
@@SK-kh2rs Just been reminded where I have heard this argument before, watching ‘A Christmas Carol’.
Not to mention all the other taxes like council tax and VAT.
TV tax and road tax
So a rise in Corporation Tax to 25%, coupled with a reduction in the tax free dividend allowance will make a considerable difference next year. Wonder whether any of the top 10% of earners are thinking of moving country?
THis is all to stop the dividend loophole I think in a short time Salary will be the way Directors are paid The loophole is closeing make the most of it directors could see 70% taxation of dividends inc corp tax 45% plus 25% Corp tax is 70%
I would be
Our government have done nothing in the last few years to encourage growth, at every turn they make it more difficult... and looking at the sheet, you can see why.
Don't forget that if you're a student gradutating on a Tier 2 repayment loan, that would add 9% to the tax burden. So, a successful graduate earning between £100-£125k would be paying a rate of 72%. I mean, why even work anymore at that rate?
Most pay less than £10 monthly
@@SK-kh2rs how can it be possible?
Why on earth are people still paying taxes to this crime syndicate?
They have no idea about it. They don't know their own rights.
This is a really good video, it would be also better if you could show the effect of a day rate on an Inside IR35 contract where employment taxes are taken first before gross pay even starts. I think the marginal rate of tax is getting close to 70% on that £100-125k band meaning some contractors don't want to earn at those levels and be forced into completing self assessment, preferring time off and to take more leave.
I think it is 76% as 60% income tax 13 odd % for employer NI contribution and 3% for employee NI contribution.
@@vaibhavaggarwal5300 i think it is 13% employer NI plus 1% apprenticeship levy.
So if you make £100 with a day rate at this marginal rate you lose £14, so £86 - then you take 60% plus 2% employee NI - which is then £32.68 take home from £100 - or 68% tax.
This is on day rate "inside IR35" income between £100-125k
As other have mentioned if you happen to be a graduate, you would also lose a further 9% which would leave £29.73 or over 70% tax
And the most rare efficient salary level is £12,570 if you're a company director. Yes, you pay employer's NIC but that and the additional salary is deducted from profits subjected to corporation tax. Also, also if you have two or more employees, you get a reduction of up to £5k in your employer NIC bill. So for a typical small husband & wife company where both are employed, you should be paying a salary of £12,570 (23-24 onwards), as you'd be paying no employer's NIC due to the Employer's allowance.
Long story short. Talk to your accountant who (hopefully) knows the full details of your circumstances. These guides are very useful but can't take into account personal circumstances.
Let’s not also forget that when you use what is left to buy anything you pay VAT of between 5% and 20% on non exempt products!!
We should pay VAT on junk food
I pay the top rate. I am only 35 and I don't even own a house yet. But I still hear people claiming people like me should be paying more in taxes. It's truly unbelievable. I am seriously rempted to move abroad. The entitlement of the tax man/members of the public is unbearable, no gratitude, no thanks, nothing. Yet I am paying FAR more than my fair share. I don't use any services, I just dare to earn more. I have no family, no dependents etc (I don't want marriage or kids) so I am deemed a fair target. It's messed up.
but boat people need your money /sarc
The additional 1.25% NI was scrapped a couple of months ago.
The 63% highlighted and then the additional rate above that, is precisely why I, and many of my colleagues, have gone onto part-time contracts - it's simply not worth my time to be at work given those punitive rates. Many of my colleagues have also moved abroad - making use of the tax loop-holes designed for MEPs, which still exist. They just commute in by air, do their work, and commute back to France/Spain/Portugal - take your pick; some even commute from Canada and further afield. So despite being 'high earners' contribute zero tax to our country.
Not saying it's right - but thems the rules!
Must be fun to fly abroad every day
@@truth.speaker it’s just a job. A pretty cool job, with the best view of any office - but it’s still just there to provide a living and pay the mortgage.
@@phil_nicholls yep. But if your job let you fly abroad every day that's special
They must be making a lot
People need to wake up and ask if they are obligated to pay tax, which they're not.
I pay 1.7% in Switzerland and everything just works here
I heard a stat the other day, the average full time salary in the UK is about £38k, the amount of government spending per full time worer is £32k...
It blows my mind that there are people in this country think our problems stem from the state being too small!
There are over 10 million people on the states payroll in the UK. Crazy.
No one ever believes it! Offshore freelancers (particular ones that work for Rishi Sunak) receive significantly more than you'd ever earn living in the UK.
IR35 literally makes it impossible to freelance in the UK, we are prisoners.
And big corporations pay no tax or a few percent only
This calculation was done a few years back by some fiscal organisation. They got around 83 to 85%. Itll be 100% when the CBDC crypto comes in. All roads lead back to the tax office.
This is very clear laid out and so well explained. ❤ thanks !
You missed out the effect of the HICBC on those who receive Child Benefit and earn above £50k. Difficult to quantify, as it depends on how many children you have. But for those affected, it's really rather crucial to know it's there.
yep this'd be a good addition to a great video
How do our taxes compare to other countries? I wonder how if outsourcing so many public services is pushing up our taxes. What does the overall picture look like with vat, council tax and energy included look like compared t other countries
10 million extra people in 10 years has crippled public services.
@@ApexCypher_ and old people living forever
@@SK-kh2rs Great point 👍
On the income tax side. The employer pays 15% on top so look at government cut on employment income. The corporate tax level will also go to 25%.
Thank you TIKHistory for telling me about this specific video and this channel.
Thanks for the video. If you plot tax paid vs income it will highlight the odd region between 100 and 150k
Good video, this doesn't even consider student loans, which for all intents and purposes is a graduate tax which most people will spend most of their working lives paying off, add another 9% tax on top at £20-27k threshold, also frozen for years!
It's not a tax. You named it already, it's a loan. It was nice to spend the money now you need to pay it back. Have you ever had a money to spend from the tax you pay? It's two different things.
The fact someone is low erner only works in his favour here, because you will never repay everything you have borrowed your loan will expire before you pay it back in full. But yea lets complain about another evil tax.
@@pistopit7142 It's call student loan but its repaid as a tax at 9%. Martin Lewis has said this for years.
@@garycroft8213 ah yes, If Martin said that then it's a tax not a loan
@@pistopit7142 its a tax because its taken from income at a specific level @9% - it should be called a graduate tax, that would be more accurate.
These taxes can just render a business not worth it. Im a plumber and the referral fee for my emergency jobs is 50% of the bill. If the emergency company charges £400 for the job then that takes me £400 closer to the VAT registry threshold but really I've only earned £200 for the job.
If I hit the VAT threshold then I have to pay 20% vat on the £400 bill, so that's £80 of my £200 share, gone before any other tax, thus rendering the whole thing not worth doing.
The explanation is very comprehensive. But it would have been better if a few example with different income was calculated and shown.
Great video. However tax on earnings is not the full story. As one commentator say’s add Council Tax, VAT, fuel duties, alcohol tax etc. What is our tax burden then? At at the end of our life you can add on inheritance tax which will take even more of what’s left. It would be good to know what these come to.
When it comes to Director’s many of them abuse the system and expense their own personal expenditures against the company and deduct the tax from this expenditure saving themselves a fortune whilst increasing the tax burden the rest of us. This includes meals out, trips abroad, golf memberships and other ‘subscriptions’, domestic goods, cars registered to the company used for personal use, hiring family members as ‘employees, overseas investments and savings. What tax do they pay in reality when you acknowledge that their tax abuses are endemic and is the reason why they frequently have lots of money.
You're right the FULL TAX (or PARASITE) BURDEN includes all the above for the individual (add in various taxes on housing including Inheritance, Stamp Duty, Capital Gains etc. All the VAT is huge every day.
I think that's a much more serious problem than the ways anyone who can make money work for them uses those ways to avoid paying tax. The only difference is these people have a way to avoid it while most people are SLAVES to TAX and have no say on it or way to avoid being parasitized by the government.
Tax used to be to give from those in society who did well to help compensate the those who did less well and keep everyone in society relatively happy. Except here's the big change: In UK today NO-ONE cares about ANYONE ELSE because everyone is different: Few people live in coherent societies, it's atomized and as such tax is just a burden with no benefit to individuals because it's not going to their own "communities". There's no such thing. The government spends other peoples money on all sorts of utter wasteful BS creating National Debt and Deficit Spending vs Revenue (from taxes!).
Now add in student loans that have trapped a generation by effectively putting them in incredibly high tax brackets. It’s a hidden tax.
pension aswell. many countries covers old people regardless of contributions.
That, combined with the average price of a house being around £300k, will ensure that the only way young people will be able to afford a house is being born to rich and generous parents.
a loan is not a tax, its a loan,
@@jamiebanyard1792 in most countries university either costs about what a student would earn off a couple of hours work a week, or is completely free. Universities make most their income from research. In the UK it is a tax.
Darren: Thanks for this. A minor point: employees *may* have to pay 5% pens con - depending on what their employer pays. A total min of 8% is required, with employer contributing at least 3% (thus employer 5%). But employer could pay all 8%, thus employee may choose to pay nowt. 5% is thus notionally reasonable but should not be assumed. Tax relief is of course received on it so 5% contribution doesn't quite equate to 5% less net income.
Would have been good to add the increase in corp tax from April. 26.5% effective above £50k. Then you get numbers that really make you wince. Lot of us will be funnelling into pensions over the coming years.
At this point if you are an entrepreneur / high earner the only solution is to pack your bags and leave and restructure your income / business around a zero tax jurisdiction.
You have forgotten the NI by the employer, which is essentially money that should have been given to you as salary.
Great Video, but you have done the classic "Daily Mail" technique of conflating the tax rate with effort and productivity. You will know that many european countries have higher effective rates but better productivity why?
Because productivity is a measure of how much value is added per unit of input. In the UK we lag fair behind other countries in terms of 1) Investment in people & training 2) Investment in machinery to improve output 3) research & development into more effecient methods of production.
We also have plenty of 'zombie companies,' which have been allowed to continue due to the low interest rate environment meaning borrowing to keep going is cheap
Employer’s NI, main reason I subcontract at the moment rather than employ.
This made me physically sick.
Yup, why are we destroying ourselves? Disgusting
Shocking
Also there are interest rates for those on mortgages, vat, road tax, insurance, private pension, council tax, water bill, mot, and will tax
Just watched your interesting video on Taxes.
Could you now add VAT, council tax, road fund licence, tax on petrol, if you smoke and drink Alcohol taxes,ppi tax,savings tax, stamp duty, inherited tax.Their are also congestion charges if you need to go to London to work I know that some of these taxes do not applie to some such as none smokers and poeple who abstain form alcohol, but just would be good to know how much someone who does partake in the above would actually pay on the pound they earn. Just VAT which we pay on most items is an Extra 20% so the average person is already paying 53p on every pound the earn over. £12570 that's frightening enough befor you add the let say £1500 pounds average in council tax and their are so many other taxes we probably just don't think about
The company director tax isnt as bad as it would appear though according to this spreadsheet. If you have a wife or husband you can split income with them. Also, no accountants would advise you to pay yourself over £100K/year. They'd just tell you to carry over the rest of the profit and pay yourself in the new tax year.
It also doesn't take into account ways of reducing your taxable income which all company directors (pensions, buying appreciating assets etc.)
Long story short: nobody earning mid 6 figures or 7 figures + as a company director is paying anywhere close to 30-40% tax, unless for some reason they are choosing to.
As someone who runs a small LTD company I am astonished at how much the government takes from myself and my staff. 25% of profit, then 32 - 60% of income then 20% VAT then council, road, inheritance & capital gains tax. But to justify all of this we can’t get a police officer to attend a crime or an ambulance to attend a medical emergency…. HOW ?
Thanks for the video. These rates are disgusting
this is just to start with. The full amount paid is a bit more than that when you take into account VAT and all other smaller ones added to products, fuels, etc.
Great video, but for the complete horrifying picture I suggest also incorporating Employer NI on employees, to show the percentage of money leaving the employer which is paid to the employee, at the margin threshold you illustrate. Even more shocking, and entirely relevant to small business owner decisions as regards strategies.
Thanks for video showing what income tax and NI we pay at different thresholds.
Wow thank you so much! Fantastic video
Stealth is the word. People think headline rates. 40% and 45%. i've had this argument with people who earn less than 50K, which is most people. And they all shout tax the rich and then talk about taxing EARNED income which screws people working hard to earn more INCOME. Looking at this reality why would anyone want to develop their skills and experience and try to earn more money through EARNED income.
Of course if you could INHERIT your money invested in assets. The WEALTHY, you pay little to no tax and no one ever talks about increasing your taxes. It is utterly self defeating. This cannot go on, and we need a real an honest discussion about taxes on INCOME & WEALTH
We should be encouraging people to work hard, develop their skills and capabilities to earn MORE money through earned income that creates more WEALTH. Not sit on their ARSE extracting Wealth from the economic rent & taxes that burden EARNED INCOME.
Even surfs only paid 10% to the Lord. Our ancestors would weep if they could see us.
Yeah tbh it was a good deal at a 10% flat rate. Not they split it take 20% here, 15% there. Then when you add it up it's 60%
There's nothing else to conclude from this other than if you can leave the country you should
Keep them poor.
what about VAT? This is simply taxing on money you already paid tax on. Glad I moved to Thailand 20 years ago. 7% VAT here btw. I worked out I would have paid 70% if you add VAT, fuel if I had of stayed.
Don't forget corporate VAT on over £80k , student loan, pension, VAT on everything you buy, council tax, road tax, BBC TV tax, insurance, MOT, inheritance tax, CGT it never ends. That's why rich gets richer - they have no income and therefore no tax. They have wealth which cannot be taxed. Poor people get support. Mid people get squeezed- worse position to be in
You've forgotten some key taxes that further increase the real rate of tax we pay in comparison to the value of the work we do. If you're selling to consumer, 20% of the end price is VAT, so already the value of the money coming in is reduced. The already reduced/taxed value of your economic output then compounds through the income tax system, and then when you go to spend it the purchasing power of what you have left is reduced further by the second dose of VAT when you buy your daily necessities. While some parts of life might be taxed at different rates, the ultimate result for someone in the lowest tax band living paycheck to paycheck is a real terms tax rate of circa 60% once it's all compounded, not including the value of their economic output which was siphoned off by their employer or indeed was also paid in corporation tax.
That's one full money cycle, from earning through to receiving goods to live on in exchange for your work done. It's VERY well hidden but the value of your own work that you're left with is little more than 40%. And again, that's for those in the lowest tax band.
We're taxed to the eyeballs and it's no wonder we struggle to get by.
The fact this hasn’t been commented yet makes me feel that I must be wrong... But the bracket 100k-125k is actually effectively income taxed at 50%.
It would be 60% between £100k and 112.5k if you lost your tax-free allowance pound-for-pound, not pound-for-two-pounds.
Your maths is wrong.
If you earn £100 as a company you get 19% off that before you can dividend, so £81 left, then 8.75% of that as a person (depending on when as 1.25% is gone) leaving you £74 which is a tax rate of 26%, not the combined 27.75%.
Brilliant explaination. Thanks. … as One of the other commenters says that with your net income you don’t have to pay council tax for the fix charges on your utilities which are effectively a tax road tax bill tax VAT on everything bye see you probably left with about 20% of your income if that… rule Britannia….If only all the striking workers understood they should be screaming for a reduction in tax rather than increase in wages but of course they’re encouraged to scream for an increase in wages because more of the income will then go back to the government’s tax ha ha time to move to the Isle of Man or the Channel Islands… ps just subbed
the way i look at it if you are limited company . it is weighted to your confidence. privately owned is weighted to financial ability . correct me if i am wrong .
My only criticism of this is that the calculation of the tax on corporations does not seem correct to me. If you have a hundred million pounds in profit and you pay 19%, you now have 81,000,000 pounds. Then if you pay 39.35% tax. You have (81,000,000*0.6065), which is 49,126,500. Therefore, you have actually paid 50.87% tax not 58.35% tax. Dividends are paid out of profit not out of gross income and therefore, it is taxed as such too. If corporation tax increases to 25%, then the tax becomes 54.51%
Gotta love these progressive tax rates!
Just to make sure, that people can't be bothered to work hard...
Also stops them from ever owning their home.
Excellent video! Thanks!
So basically, the system benefits the low income individuals..but those that study hard or grid hard and make it are punished in this land. Not fair...let's say you want a good job, universities are marketed a way to make degrees a key "step" for such life and then you end up with a minimum £28-£30k in student deb you have to pay off, now add income tax, national insurance and the mandatory pension 5%...
I feel like getting up and smacking my granddad for immigrating here. Doesn't favour the hard workers who make it. No one gets rich in a day, it is a grind and takes effort and it is the rich who help employ more into their businesses and take responsibility over everything.
I swear we need a better system..if the politicians are meant to do what is best for the people, in this day and age, everyone can vote quickly on decisions..politicians should release polls for the entire nation to vote on every week, let the country decide whether to increase/decrease, new charges etc and the politicians should just act on it.
LOOL!!!!! my Gdad immigrated here too but bro it be better where i would of been
@@abdullahX001 it does….he even said himself he pays him self 700£ a money PAYE and the rest in dividends…that’s your proof there lad ahaha
@@ZenoGotWet calm down Biriyani, the point was that, you ain't gonna get an economy with alot of money and businesses if you don't give preference to them as well..they will go off to somewhere else. You were homeless and now retired, you are a very insignificant person. There may not be anything of value to remember once you are gone as you chose this life. Not everyone wants this and no growth emerges for a society or a community when you stiffle opportunity. This is a cynical world
Pension is not mandatory, you can opt out. I would stay only if employer pays 2.5x what you do.
@@ZenoGotWet hey Biriyani is a luxurious and delicious food but anyway, I don't think it is about greed at all. I think there are fundamental benefits in being valued for what you do. There is a reason why someone is in low income Vs a high income and if you don't give enough value back or appreciation, they will go somewhere else. This is especially a problem as that "somewhere else" does exist. The contribution of a high income earner is far greater than a low income one and plus look at this way..let's say you work 19 hours a day, 2 jobs flat out and your best, do you really deserve punishment for your effort and what you are contributing to? Vs someone who chooses to just do basic job? I don't think that is fair or right. Reward should equal the value you bring, humans need incentive. You see this all of the time, it isn't just a work/tax thing, just look at your personal life..from owning houses to their partners, there are expectations for what you put in
You get taxed after pension contributions so you can reduce the tax paid by increasing pension payments obviously you don't get it back until your 58 or whatever the limit is currently
Then, after you have your income feel free to pay 20%VAT, or alcohol duty, of fuel duty, ... so most people must pay almost 70% of their income in taxes .... unbelievable really.... I am so happy we have a Conservative Government !
Ever looked at moving to the Isle of Man? Or setting up you companies via an accountant there?
Exactly why I left the uk
Makes you wonder how people afford 400k Ferraris and Lambos etc when approx 60% of their money is taken by the govt. For someone to earn 500k to buy a Ferrari, they have to actually earn over a million!
you can own ferrari through your own company and the costs/depreciation becomes tax deductible
@@rufusli7056 what about benefit in kind charges?
@@rufusli7056 Only if you only use it for company use and not personal use, legally.
Not to mention that all this money we're paying goes to fund a criminal govt serving a criminal family. ;)
Income tax in the 100-125k bracket is not 60%. It gradually moves from 40 to 50% at the highest end. And even calling it that is a stretch - the tax bracket has the same 40% throughout but applies an additional condition. Anyway total deductions at 125k per annum is around 40% including NI and that's how much YOU really pay (not to be confused with how much you really cost your employer).
Also the 5% pension is not compulsory. It's annoyingly an opt-out system and your employer has to re-enrol you every two years but you can opt-out and make your own pension arrangements if you want.
Add inflation to the 63% @ around 18%+ . Inflation is a stealth tax….
By the time you add VAT, Council tax, tax on insurance and flights, stamp duty, etc. etc. not much left then
We get absolutely screwed in the UK. WE SHOULD ALL STAND UP AND SAY NOMOTE TO IT. MAKE A STAND NOW. Just don’t pay tax.
Get taxed on everything you get paid and on everything you buy. Tax should be on the corporations not on individuals and especially not on commodities like fuel, shoes and clothes
Let's not forget the IHT (and 7 year gift clause that most people don't know about), CGT and VAT...just to really shaft brits. Also only 13% of tax payers )the entire population in the UK 65 mill...taxpayers 30 mil) earns £50k+ Yet a standard house is £250k - £450k...meaning you must be in a relationship most of the time to afford a house at 5x salary. The only other way is to either earn more...so be in the top 13% of earners, have influx for a higher deposit from deceased family, or live at home if possible into your 30's / 40's...no idea why no one talks about this more.
for every ~£10k you earn yearly you only actually take home £557 extra.
It's no wonder productivity is crap when you're expected to do so much more work for just £557 a month over a minimum wage job...The 'average wage' in the UK is £27k
e.g
£16.5k a year your take home is £1266
£26.5k - take home £1822
£36.5k - take home £2379
Bearn in mind for a 14 bed manor in France it's £400k.
For houses across Europe you can buy them from as little as £5k or £25k for a half decent one (e.g in Germany you can buy a 10 bed house for £25k...at least in 2019 when I was looking and their minimum wage is 12 euros an hour and the Euro is pretty much on par with GBP...so who has the more comfortable life? And yet brits were told to leave the EU and now they're totally screwed with an economy that is literally imploding because all foreign investors have moved back to their own countries and Ex pats have been forced to sell up and move back to the UK to be shafted even more.
over 150K plus there are other ways to avoid or reduce tax
Awesome videos!
You didn't add coucil tax
Come to Hong Kong, folks. Pay 15% income tax and 16.5% corporate tax, no dividend tax, no capital gains tax and no tax on interest income.
the UK Government shouldn't be taxing anyone under 20k; if you agree can i get a like?
@Honestmoney.1 JOG ON
These 4/5 countries running on insane taxation system are. collapsing by the day.
Should definitely take on more tax codes moving slower the more you earn like that USA . A jump from 20% - 40% is just unlawful and corrupt
Inheritance tax is also a joke
Agreed. Robbing dead people who paid tax all their life already is dark.
I earn a good hourly rate as a senior professional. I pay alot of tax as a FT employee. I decided to cut my hours and only work 4 days a week. I get a slight pay cut by pay much less taxes. Haha to the Gov.
It is abnormal to spend our time wondering how to optimize our taxes rather than focusing on our work.
The UK is drowning in Tax
Might be a good idea to make a video on how to pay as less as possible.