Great video Chris, As a former PAYE employee and business owner, I can say the business owner is more stressful way to get wealthy :) However there are definitely benefits to running a business. The key in wealth creation is buy assets, property, Shares as you say. I have 4 properties with zero mortgage and a decent SIPP pension which got my taxation down each year by paying in and claiming relief. The only mistake I made was not buying the properties through limited company. Now the IHT rules have been turned on it's head i'm looking to retire earlier and many others I know will leave employment earlier.
Very similar. We'll be retiring earlier and drawing down the entire pension gradually and gifting to the children. And selling BTL and gifting the proceeds. In our 50s so hopefully have time to pass everything over before we pop our clogs!
Great video as always Chris. Taken a lot from this and the tax staging video in terms of my planning for twenty years hence when I'm planning on retiring! Thanks for the info. You're a gent and a scholar!
Yes but genuine farmers are being hit for this which is unfair. The wealthy land buyers should be charged tax when land is bought or sold not when it’s farmed and passed down to kids to farm.
taxes are the price we pay for civilisation. Once the Clarksons of the world stop investing in farms as its no longer a tax dodge the prices will come down and new people or farmers children can afford to buy farms and become farmers and not have massive mortgages and all the worries that brings. it's basic supply and demand. when Thatcher enabled the right to buy coincil houses, so reducing the supply of social housing just look at how the price of a home shot up. agsin supply and demand. Very interesting video, Thank you Chris.
Yes but some of these assets carry risk and that is why tax is lower. These are also used by normal people who are able to save some money not just the rich (multi millionare o billionares). In fact we could argue that tax on investments should be lower for people with less than a couple million pounds so to encourage everyone to invest and save more. That is how you build wealth not by spending at the shops or going to the Bingo.
Yes I think it would be fair to say that most of the adult population have some sort of exposure to risk assets, usually through a workplace pension. The wealthy tend to leverage their assets in slightly different ways though.
This was really good. I have kind of started this already by diverting funds into my pension rather than paying off my interest only mortgage . I am now wondering if i dhould ever pay off my mortgage especially if I can continue to borrow so cheaply.
Contributions into ur pension get a Tax rebate dependent on if you are basic or higher rate Tax payer , seems the best option to me. B4 I retired I drew modest liveable income from my Business, ALL the remaining profit from my Business was donated to my Pension, so I paid no Corporation tax as my Company made no profit , leaving only 7 % personal Tax to pay assuming you have a LTD company …..
CGT is 24%. Dividends and Crypto yield farming are taxed as income. Pension pots not in IHT, so the rich are still paying tax. Also shares are purchased with currency that has already been taxed. We need a video showing us how to properly reduce tax, like offshore banking tc
@TheSilvercue Yes CGT rates were confirmed in the video. There are many ways to avoid estate taxes. Every asset is purchased with taxed income, but previous tax is then a sunk cost. After that, you gain choice on how you’re taxed (as explained at start).
Really interesting video - I think things like equity release are going to become more important as the implications of the IHT on pensions starts to become clearer. Especially up to the age of 75 - where withdrawing the pension and paying income tax on it, then gifting to keep below IHT limits is not very tax efficient vs Equity release->Gifting. After age 75 I guess things change as even if you pay 40% tax to drawdown and gift it is not going to be any worse than the inheritor paying probably the same 40% when they get the pension.
An interesting and informative video as always Chris! One question I have about CGT is to do with the impact of inflation. If I bought an asset for £100K 20 years ago and sell it for £150K today, I have to pay CGT on £50K - correct? That doesn’t seem fair if the true value of the pound has decreased by 35% (just an example) over that same period. Worse still, if the value of the asset has increased at a rate below inflation but you still have to pay tax on a ‘gain’ that is in fact a net loss… Or do I have this wrong?
Yes as the person above quite rightly states, there is no indexation allowance anymore. The only thing we can hope is that our assets outpace inflation otherwise you could find yourself paying tax on a loss in real terms!
@@chrisbourne-retirementplanner Thanks for confirming my fears Chris... I'm not a fan of either IHT or CGT. I pay lots of tax (income, sales, NI, Council to name a few) then with whatever I have left I save or invest (i.e. take on risk) and if I'm lucky enough to grow the capital (above or below inflation) they get to swoop in for another slice (having taken no risk themselves) if I realise a profit larger than my initial stake or an even larger slice if I want to pass on my life's endeavours to my kids or grandkids when I die. At least with Dick Turpin you could see the eyes of your mugger!!
Oh my I think it’s time to go see a financial advisor - your info is amazing thanks. Is there such a thing as a free indépendant financial advisor? Or should these be avoided and use a paid one? ❤
Great Channel and content 👌. But if for example Musk gets the 500m credit line at 5% interest backed by his shares, at the end of he day he still has to pay that loan somehow (potentially having to materialize the selling of the shares and paying tax on it?)? Or could he instruct the lender to take the shares directly and avoid paying tax altogether?
@@blakeheywood Strange - I can see a lot of people have followed it, so it might be the browser you’re viewing on. Here is the link though: ruclips.net/video/nUDQ1Zq-ee0/видео.html
Don't let the tax tail wag the dog is what my old accountant used to say when i used him for buy to let properties. Now I'm debt free and intend staying that way.
@@StephenLewis-m5s I agree. There has to be potential for assets to outgrow the debt. Leverage is powerful. The truly wealthy understand and utilise that.
@@chrisbourne-retirementplanner I bought a BTL in 1997 for £60k. £3k deposit and £57k loan. It's now worth £350k with mortgage interest and expenses covered by rent. So £3k has become £300k after costs and CGT. If I'd invested that £3k in 1997 I would now have approx £40k based on average annual return of 10%. Leverage is extremely powerful. I was very lucky though. Had no idea that the property boom was about to happen.
The lifetime mortgage can seriously erode the value of your property as the interest compounds… this should be highlighted and options to continue paying the interest on the equity proportion released should be considered so the 100k you release versus as 500k property means you still retain the 400k property value (+/- property price changes)..
@@londonlad5701 Yes, the future amount owed is shown. Paying the ongoing interest in this scenario would kind of defeat the objective though. Those are amongst the risks to consider and why advice is required, as stated. However, in a scenario where the fixed interest rate is 6% and £100k is released, 2% annual compound growth on the value of the property would actually see equity increase from the starting point, not reduce. Figures are not guaranteed of course, again as stated.
Hi Chris Just a quick question, I currently have 4 pensions and I am looking to retire / step back into temporary work in around 7 years time. Do I need to be changing my pension allocations as currently they are in medium / low investments which the pension providers have put them in or shall I leave them as is.
@@whatawonderfulworld3616 There isn’t a right or wrong answer to this as there numerous factors to consider. Depending on how you wish to take benefits, it may be appropriate to reduce volatility risk, but if some of these pensions are surplus to immediate income needs in retirement, reducing risk may not be necessary as it’s likely to inhibit growth. I’d have to say that this is a situation where advice is required, because it depends on individual circumstances.
@@chrisbourne-retirementplanner Hi Chris I have accounted for all my pensions in my retirement plan but again this is just what I have put together myself and is no way as comprehensive as one of your plans. I have watched a lot of your videos on you tube and I find them very insightful, keep up the good work.
In the Musk example, how does he make repayments on that 500M loan? Or are repayments of these securities backed loans structured differently to a loan from a high street bank?
He doesn’t plan to make repayments; the concept is that they ‘die with debt’; the debt is repaid by the next of kin who sell the shares but don’t have to pay CGT because of ‘CGT uplift’ that’s is allowed by law
The answer is a combination of the comments above… The capital element may not be repaid during his lifetime, the interest element could partly be serviced out of the loan that was advanced. He may think to himself half of this advance would have been taken as tax, so I’m going to invest that amount, and if I can get double the rate of return I’m paying in interest, then the other half is costing me nothing. He thus ends up with even more appreciating assets, and is even wealthier than before. There may be an element of interest roll up in the deal as well; depends on how it’s structured.
But if our pensions are unfunded final salary pensions which can’t be converted to sipps we have fewer options? Assuming we were already going to max out on the lump sums
Say you have a house valued at £1m . Any mileage in doing a lifetime mortgage and take out say 40% and give it away to family immediately. When you die you've enjoyed living in your home and reduced your estate in the years previously. The mortgage company have first dibs at the property and the heirs get remainder but at a reduced potential for IHT.
Yes, it can be done. Whether the beneficiaries are better off depends on what they do with the money now of course. Also, the gift would be a PET and would remain part of your estate for 7 years after making it.
A debt against property may help with health care costs later in life if required, but with that huge pension pot surely your beneficiaries are going to get hammered with the currently expected IHT rules coming in a couple of years.
The debt brings the overall estate value back down again though, so there would be little difference in IHT paid between the two scenarios. If you assume that the total estate value above the nil rate band would be subject to IHT in both scenarios, including pensions, the lifetime mortgage scenario would still produce the better net result. Figures aren’t guaranteed though of course!
Brilliant video! Future governments need to find better ways to raise revenue without relying on income tax, capital gains tax, or inheritance tax from individuals. As artificial intelligence makes the public sector more efficient, there will be significant savings. Governments can then focus on applying taxes to services and consumption, and on activities that harm the environment, like certain forms of travel. By shifting taxation towards consumption and environmental impact, we encourage responsible choices without penalising hard work or success. Citizens can continue to contribute through national insurance, but all forms of income should have zero taxation. This approach promotes fairness and efficiency, aligning our tax system with modern economic realities. Additionally, governments can raise revenue by taxing companies that gain the most during major transitions like digitalisation and decarbonisation. This strategy avoids increasing the burden on individuals while ensuring that those who benefit significantly contribute their fair share. It's time to move towards a tax system that rewards productivity and innovation, encourages sustainable practices, and leverages technological advancements to create a more equitable society.
Is there any way of borrowing against a large pension pot that is in drawdown, using that pension pot to pay off the debt upon death? Or always 40% IHT to pay upon death if pot takes estate over £325K i.e. any way that a loan (if possible) can reduce the size of a pension pot by using said pot to pay it off before any IHT is applied?
Hi Chris wife has a nest pension very small value 22k at 53 years She has a 20k bond expiring now. Would you re-invest that for another year in a bond or isa or nest and get the 25% tax relief which I think is a no brainer ?
I can’t give specific advice here but the 25% uplift is certainly attractive if her income can substantiate the contribution. Just be aware of the different risk profile of the underlying pension investments compared to a fixed rate bond.
@@fslinteriors7889 Don’t worry, they still pay more than you and I. The companies and employment they’ve created also raises billions further in tax revenue.
@chrisbourne-retirementplanner no they don't in proportion to their actual wealth as opposed to income...Hence they buy more assets and get richer. Tax capital gains more including inherited wealth.
Musk claims to be the largest single taxpayer in history at $10 billion in one year. The rich do pay tax, and the thousands of people they employ each pay tax, and the companies they start and grow all pay various employment and corporate taxes. It's the black marketeers and white van man cash only guys who cost the exchequer more in tax that the rich avoiding tax.
@@anthonyrybicki1000 I see it differently… Every penny of tax collected from employment they’ve created, is tax revenue they’ve generated. I don’t really mind if a few people pay very low tax rates as a proportion of their own total wealth. There has to be an incentive to get wealthy in the first place… If there wasn’t, none of the companies we rely on would have been created. Also, if I was super rich, I’d trust myself to spend my own money more wisely than I would any government, and create more value with it - it’s easy to spend money that isn’t your own.
Do you have a video explaining when to sell shares held in a gia to fund an isa and the tax implications? If you have to find 10k per year to fill an isa and you have 15 years' worth available in a gia, would you sell 10k and take the tax hit on 7k of it or would you just sell 3k per year so no tax to pay until you die?
Not specifically. Remember that the £10k you sell is unlikely to all be gain though - some of it will be capital. For example, if you bought shares with £100 and they grew by 100% to £200, only half would be potentially taxable when sold.
Something I am unclear of. The example 100k taken as a loan are invested to give both 10k and 6% return a year, that return would be taxed, wouldn't it, so 4.8% net for basic rate payer. Whereas the 6% in interests accumulates gross. Is this considered in the example?
@@giuliovuolo1 No it wouldn’t be taxed, at least not at the rate you’ve outlined, because the £10k being taken is out of the capital that’s been loaned. There’ll be some tax on crystallised gains going forward, but the payment will still be primarily capital and therefore not taxed.
I m still not sure about this. Surely because of tax to pay on any investment returns there would still be a deficit against the loan interest payments
@ No there’s actually projected to be capital left after the first 10 years - you can see it on the comparison of future assets. It’s because the capital is being drawn out gradually… £10k taken after first year means there is more than £90k left at end of year, because of growth. Same in second year, and so forth. By the time £100k has been taken back over 10 years, there is still money left in the pot. Tax will also depend on where the growth derives from; some will be capital growth (partially covered by CGT exemption), some will be dividend (partially covered by dividend allowance).
@ Also remember the tax saved by not taking it as taxable pension income. This saving compounds and outweighs the interest in the example (figures aren’t guaranteed!)
Borrow money and invest it in shares and you win if shares outperform the loan ! You don't need a graph just an appetite for risk in your retirement. Meanwhile the loan interest is not tax deductible but the pension is taxed, sooner or later. And under IHT, pensions are double taxed possibly up to 80% but your house is only taxed at up to 40%.
@@blister6884 Yes but that tax then becomes a sunk cost. The important thing is utilising income in the most effective way to avoid staying in the same high tax cycle forever. Warren Buffett might have an effective tax rate of
Chris, wouldn't Elon's scenario be that he was paying the 5% interest every year on his loan so eventually could be over the amount of tax he would of paid
It’s a good question, but it depends on a couple of factors - what deal is structured in the first place (is loan interest allowed to roll up for example) or if not, does he keep some of the capital back to invest it in an attempt to ‘outgrow’ the rate of interest. If he kept half back for example and invested it, achieving a return that was double the rate of interest paid on the loan, he effectively covers the whole cost of the loan, meaning the other half of the loan is essentially free money.
@@wl660 These figures are quite small of course, relatively speaking, but the amount of income tax paid over the first 10 years is about £18k less, and £450k vs £400k is a 12.5% improvement. Figures are not guaranteed obviously!
Could do the same with whole of life lnsurance. Borrow against this asset and your beneficiaries will get the benefit net minus the outstanding loan amount. Rich also create foundations and place assets inside them to grow tax free; and use the money inside them to make political and charity donations, and thus gain influence and power. Think of Bill gates or Rockefeller foundations.
It’s a fair point, but as demonstrated at the start, when you find yourself with excess income having built assets over a period of time, and you use that excess income to buy more assets, any previous taxation is a sunk cost. Also, the assets being sold might have been inherited, and the individual may not have paid tax to acquire them.
I don’t understand how this is beneficial. Yes, if you take £200k as a loan and pay 5% interest it’s less than the 40% or so you would pay by taking that money out of your company, but then the £200k isn’t yours. You’ll be paying 5% per year interest and after 20 years you’ll have spent £200k on interest and still owe the bank £200k.
@@alrightlove6317 That’s only part of it - it’s more about the tax you save by NOT withdrawing money as pension. That money remains in the pension, grows, compounds, and produces a better net result as the cashflow model demonstrates. (Figures not guaranteed)
The capital element may not be repaid during his lifetime, the interest element could partly be serviced out of the loan that was advanced (also using other income streams like dividends as mentioned above). He may think to himself half of this advance would have been taken as tax, so I’m going to invest that amount, and if I can get double the rate of return I’m paying in interest, then the other half is costing me nothing. He thus ends up with even more appreciating assets, and is even wealthier than before. There may be an element of interest roll up in the deal as well; depends on how it’s structured.
but its easier to watch netflix, go to pub, eat unhealthy and be fatty kitten then complain that its everybody elses fault not even mentioning that richest are inviting you by teaching you how to do that FOR FREE but tomorrow is arsenal playing so ill prefer to stay poor xD edit: 4:00 you are wrong. To get 3k in PAYE you must earn NOT 3750 but add to that EMPLOYER INSURANCE as well. YOU MUST WORK THAT MONEY TOO, otherwise you would generate LOST and should be fired why most of people believe that employer insurance is NOT paid by employee? or by customers? ergo, eventually YOU? and seriously, noone heard of kiyosaki explainign that being in DEBT is greatest thing ever? YOU CANT BE TAXED ON DEBT BUY, BORROW, DIE - and never pay tax oh yeah, why people never read kiyosaki or watch rich dad poor dad channel.... yes yes, football, netflix and all other most valuable things to do
Nice to have a You Tube without the likes of Jeremy Clarkson moaning he is being potentially paying half the IHT other people who work for a living have to.
Did you vote labour by any chance? Let's say jezza paid 10x the average person in tax. Did he get 10x the service and benefits from the government? I'm not remotely wealthy, but not jealous of those that have more than me. No one can justify in any shape or form taxing those that have more however they achieved there wealth legally. Governments retrospectively changing laws to prosecute those acting legally are the criminals. Spite and jealousy are tools of the weak minded.
Clarkson is a one off. Do you agree with this land grab on farming families? Would you work as a farmer for less than minimum wage? It’s an inter generational way of life that puts food on our tables. No, I’m not a farmer but respect them immensely. Great video as always.
You should listen to Clarkson's interview again. Won't affect him, he can afford to hide it in a trust, he was there on behalf of small farmers, don't let your anger at wealthy people cloud your judgement.
Wouldn't it be so much better to just leave High Tax UK under Labour, then buy an acre of land in Panama (very low tax), get a modest house built. Just visit the UK for whatever time you like, (NB. the illegals here don't declare much do they?). You'd probably have to apply for Panamanian nationality; maybe dual or give-up UK nationality. I'm seriously thinking of selling-up & emigrating to Bulgaria (fairly low tax). I can't stand what this government are doing to the UK.
@@jaaguitar Were you watching a different video? Perhaps check out the title - it says ‘How the rich avoid tax’ - one of the ways is through selling assets as opposed to taking income. At no point does it say that you should give up your PAYE job.
@chrisbourne-retirementplanner don't think you can copy the rich. Unless you switch to self-employed and lie to Inland Revenue about your earnings. That's what it boils down to. Although Salary Sacrifice, ISA allowances etc are good tips.
Great video Chris,
As a former PAYE employee and business owner, I can say the business owner is more stressful way to get wealthy :)
However there are definitely benefits to running a business.
The key in wealth creation is buy assets, property, Shares as you say. I have 4 properties with zero mortgage and a decent SIPP pension which got my taxation down each year by paying in and claiming relief.
The only mistake I made was not buying the properties through limited company. Now the IHT rules have been turned on it's head i'm looking to retire earlier and many others I know will leave employment earlier.
Very similar. We'll be retiring earlier and drawing down the entire pension gradually and gifting to the children. And selling BTL and gifting the proceeds. In our 50s so hopefully have time to pass everything over before we pop our clogs!
marbles in a glass. Best analogy I've ever seen. I will be using this to teach my daughter.
@@kes-UK Great I’m really glad it’s useful!
Great video as always Chris. Taken a lot from this and the tax staging video in terms of my planning for twenty years hence when I'm planning on retiring! Thanks for the info. You're a gent and a scholar!
Thanks Derek hope it proves useful for you!
This is exactly why the inheritance tax has been changed for "farmers" because of the growing number of wealthy people buying up land to avoid tax.
There are much fairer ways to plug that particular loophole than the one this government has just announced…
Yes but genuine farmers are being hit for this which is unfair. The wealthy land buyers should be charged tax when land is bought or sold not when it’s farmed and passed down to kids to farm.
So what , its their money. Inheritance tax is immoral and should be scrapped
@@systemx4 It so isn't. It stops the rich getting richer without working for it.
taxes are the price we pay for civilisation. Once the Clarksons of the world stop investing in farms as its no longer a tax dodge the prices will come down and new people or farmers children can afford to buy farms and become farmers and not have massive mortgages and all the worries that brings. it's basic supply and demand. when Thatcher enabled the right to buy coincil houses, so reducing the supply of social housing just look at how the price of a home shot up. agsin supply and demand. Very interesting video, Thank you Chris.
I'm half way there. I've got the filthy part done, working on the rich part.
Love it 😆
I liked the analogy with the glass full of marbles. Unfortunately I got a bit lost after that! 😆
this reminds me of when I took a 3% rate loan and used it to max out my salary sacrifice, turned out to make a quite tidy benefit
Yes that can be a powerful use of debt. It’s what you’d call ‘good debt’.
Yes but some of these assets carry risk and that is why tax is lower. These are also used by normal people who are able to save some money not just the rich (multi millionare o billionares). In fact we could argue that tax on investments should be lower for people with less than a couple million pounds so to encourage everyone to invest and save more. That is how you build wealth not by spending at the shops or going to the Bingo.
Yes I think it would be fair to say that most of the adult population have some sort of exposure to risk assets, usually through a workplace pension. The wealthy tend to leverage their assets in slightly different ways though.
This was really good. I have kind of started this already by diverting funds into my pension rather than paying off my interest only mortgage . I am now wondering if i dhould ever pay off my mortgage especially if I can continue to borrow so cheaply.
Contributions into ur pension get a Tax rebate dependent on if you are basic or higher rate Tax payer , seems the best option to me.
B4 I retired I drew modest liveable income from my Business, ALL the remaining profit from my Business was donated to my Pension, so I paid no Corporation tax as my Company made no profit , leaving only 7 % personal Tax to pay assuming you have a LTD company …..
I never thought of my house as a 'marble' to leverage wealth. Time to rethink everything I learned about finances in school.
It needs to be thought about carefully still, but I do think it will play a role for more people in the future.
This was amazing video Chris and I’ll be buying your training course to do over Xmas, as looking forward to using the modelling software
CGT is 24%. Dividends and Crypto yield farming are taxed as income. Pension pots not in IHT, so the rich are still paying tax. Also shares are purchased with currency that has already been taxed. We need a video showing us how to properly reduce tax, like offshore banking tc
@TheSilvercue Yes CGT rates were confirmed in the video. There are many ways to avoid estate taxes. Every asset is purchased with taxed income, but previous tax is then a sunk cost. After that, you gain choice on how you’re taxed (as explained at start).
Great video! Thanks for sharing.
Thanks for watching!
Very good content, food for thought, after the Inheritance tax on pensions
Really interesting video - I think things like equity release are going to become more important as the implications of the IHT on pensions starts to become clearer. Especially up to the age of 75 - where withdrawing the pension and paying income tax on it, then gifting to keep below IHT limits is not very tax efficient vs Equity release->Gifting. After age 75 I guess things change as even if you pay 40% tax to drawdown and gift it is not going to be any worse than the inheritor paying probably the same 40% when they get the pension.
Thank you! Yes, quite right, there will be many new planning angles when the final rules become clearer.
Great video As always
Thank you! Appreciate your support 👍🏼
An interesting and informative video as always Chris! One question I have about CGT is to do with the impact of inflation. If I bought an asset for £100K 20 years ago and sell it for £150K today, I have to pay CGT on £50K - correct? That doesn’t seem fair if the true value of the pound has decreased by 35% (just an example) over that same period. Worse still, if the value of the asset has increased at a rate below inflation but you still have to pay tax on a ‘gain’ that is in fact a net loss… Or do I have this wrong?
No, you're absolutely right. CGT gains used to be "indexed" against inflation, but that hasn't been the case for many years
Yes as the person above quite rightly states, there is no indexation allowance anymore. The only thing we can hope is that our assets outpace inflation otherwise you could find yourself paying tax on a loss in real terms!
@@chrisbourne-retirementplanner Thanks for confirming my fears Chris... I'm not a fan of either IHT or CGT. I pay lots of tax (income, sales, NI, Council to name a few) then with whatever I have left I save or invest (i.e. take on risk) and if I'm lucky enough to grow the capital (above or below inflation) they get to swoop in for another slice (having taken no risk themselves) if I realise a profit larger than my initial stake or an even larger slice if I want to pass on my life's endeavours to my kids or grandkids when I die. At least with Dick Turpin you could see the eyes of your mugger!!
Oh my I think it’s time to go see a financial advisor - your info is amazing thanks. Is there such a thing as a free indépendant financial advisor? Or should these be avoided and use a paid one? ❤
Avoid percentage based one, only use flat fee
Very interesting Chris 👍
Cheers Graham!
Great Channel and content 👌.
But if for example Musk gets the 500m credit line at 5% interest backed by his shares, at the end of he day he still has to pay that loan somehow (potentially having to materialize the selling of the shares and paying tax on it?)? Or could he instruct the lender to take the shares directly and avoid paying tax altogether?
He may not during his lifetime… That’s why it’s called buy, borrow, die. Those who inherit the shares could pay off but benefit from step up in basis.
where can I find the video you mention at the end as it isnt linked to the video?
@@blakeheywood Strange - I can see a lot of people have followed it, so it might be the browser you’re viewing on. Here is the link though:
ruclips.net/video/nUDQ1Zq-ee0/видео.html
Fascinating concepts! Blue my mind 🤣
Thank you!
I know its like he Red my mind.
Don't let the tax tail wag the dog is what my old accountant used to say when i used him for buy to let properties. Now I'm debt free and intend staying that way.
@@StephenLewis-m5s I agree. There has to be potential for assets to outgrow the debt. Leverage is powerful. The truly wealthy understand and utilise that.
@@chrisbourne-retirementplanner I bought a BTL in 1997 for £60k. £3k deposit and £57k loan. It's now worth £350k with mortgage interest and expenses covered by rent. So £3k has become £300k after costs and CGT. If I'd invested that £3k in 1997 I would now have approx £40k based on average annual return of 10%. Leverage is extremely powerful. I was very lucky though. Had no idea that the property boom was about to happen.
The lifetime mortgage can seriously erode the value of your property as the interest compounds… this should be highlighted and options to continue paying the interest on the equity proportion released should be considered so the 100k you release versus as 500k property means you still retain the 400k property value (+/- property price changes)..
@@londonlad5701 Yes, the future amount owed is shown. Paying the ongoing interest in this scenario would kind of defeat the objective though. Those are amongst the risks to consider and why advice is required, as stated. However, in a scenario where the fixed interest rate is 6% and £100k is released, 2% annual compound growth on the value of the property would actually see equity increase from the starting point, not reduce. Figures are not guaranteed of course, again as stated.
@ - sure. Makes sense, thanks for the reply 👍🏻
Hi Chris Just a quick question, I currently have 4 pensions and I am looking to retire / step back into temporary work in around 7 years time. Do I need to be changing my pension allocations as currently they are in medium / low investments which the pension providers have put them in or shall I leave them as is.
@@whatawonderfulworld3616 There isn’t a right or wrong answer to this as there numerous factors to consider. Depending on how you wish to take benefits, it may be appropriate to reduce volatility risk, but if some of these pensions are surplus to immediate income needs in retirement, reducing risk may not be necessary as it’s likely to inhibit growth. I’d have to say that this is a situation where advice is required, because it depends on individual circumstances.
@@chrisbourne-retirementplanner Hi Chris I have accounted for all my pensions in my retirement plan but again this is just what I have put together myself and is no way as comprehensive as one of your plans. I have watched a lot of your videos on you tube and I find them very insightful, keep up the good work.
In the Musk example, how does he make repayments on that 500M loan? Or are repayments of these securities backed loans structured differently to a loan from a high street bank?
He can use the loan itself for the interest repayments.
He doesn’t plan to make repayments; the concept is that they ‘die with debt’; the debt is repaid by the next of kin who sell the shares but don’t have to pay CGT because of ‘CGT uplift’ that’s is allowed by law
The answer is a combination of the comments above… The capital element may not be repaid during his lifetime, the interest element could partly be serviced out of the loan that was advanced. He may think to himself half of this advance would have been taken as tax, so I’m going to invest that amount, and if I can get double the rate of return I’m paying in interest, then the other half is costing me nothing. He thus ends up with even more appreciating assets, and is even wealthier than before. There may be an element of interest roll up in the deal as well; depends on how it’s structured.
But if our pensions are unfunded final salary pensions which can’t be converted to sipps we have fewer options? Assuming we were already going to max out on the lump sums
Say you have a house valued at £1m . Any mileage in doing a lifetime mortgage and take out say 40% and give it away to family immediately. When you die you've enjoyed living in your home and reduced your estate in the years previously. The mortgage company have first dibs at the property and the heirs get remainder but at a reduced potential for IHT.
Yes, it can be done. Whether the beneficiaries are better off depends on what they do with the money now of course. Also, the gift would be a PET and would remain part of your estate for 7 years after making it.
@chrisbourne-retirementplanner Thanks
A debt against property may help with health care costs later in life if required, but with that huge pension pot surely your beneficiaries are going to get hammered with the currently expected IHT rules coming in a couple of years.
The debt brings the overall estate value back down again though, so there would be little difference in IHT paid between the two scenarios. If you assume that the total estate value above the nil rate band would be subject to IHT in both scenarios, including pensions, the lifetime mortgage scenario would still produce the better net result. Figures aren’t guaranteed though of course!
Brilliant video! Future governments need to find better ways to raise revenue without relying on income tax, capital gains tax, or inheritance tax from individuals. As artificial intelligence makes the public sector more efficient, there will be significant savings. Governments can then focus on applying taxes to services and consumption, and on activities that harm the environment, like certain forms of travel.
By shifting taxation towards consumption and environmental impact, we encourage responsible choices without penalising hard work or success. Citizens can continue to contribute through national insurance, but all forms of income should have zero taxation. This approach promotes fairness and efficiency, aligning our tax system with modern economic realities.
Additionally, governments can raise revenue by taxing companies that gain the most during major transitions like digitalisation and decarbonisation. This strategy avoids increasing the burden on individuals while ensuring that those who benefit significantly contribute their fair share.
It's time to move towards a tax system that rewards productivity and innovation, encourages sustainable practices, and leverages technological advancements to create a more equitable society.
Thank you. A very interesting and informative comment. I agree with you that new thinking is definitely required.
Is there any way of borrowing against a large pension pot that is in drawdown, using that pension pot to pay off the debt upon death? Or always 40% IHT to pay upon death if pot takes estate over £325K i.e. any way that a loan (if possible) can reduce the size of a pension pot by using said pot to pay it off before any IHT is applied?
@@silversurfer6758 No not that I’m aware of I’m afraid.
There's a good conversation about this by Jaspreet Singh in his Diary of a CEO episode 1h50m in.
So are you saying there should be a marble tax?
Hi Chris wife has a nest pension very small value 22k at 53 years
She has a 20k bond expiring now.
Would you re-invest that for another year in a bond or isa or nest and get the 25% tax relief which I think is a no brainer ?
I can’t give specific advice here but the 25% uplift is certainly attractive if her income can substantiate the contribution. Just be aware of the different risk profile of the underlying pension investments compared to a fixed rate bond.
The world would be a better place if we had videos educating the rich on the virtues of paying tax
@@fslinteriors7889 Don’t worry, they still pay more than you and I. The companies and employment they’ve created also raises billions further in tax revenue.
@chrisbourne-retirementplanner no they don't in proportion to their actual wealth as opposed to income...Hence they buy more assets and get richer. Tax capital gains more including inherited wealth.
Musk claims to be the largest single taxpayer in history at $10 billion in one year. The rich do pay tax, and the thousands of people they employ each pay tax, and the companies they start and grow all pay various employment and corporate taxes. It's the black marketeers and white van man cash only guys who cost the exchequer more in tax that the rich avoiding tax.
Absolutely correct. These people grow they wealth of society, so they should pay their fair percentage back (to society)
@@anthonyrybicki1000 I see it differently… Every penny of tax collected from employment they’ve created, is tax revenue they’ve generated. I don’t really mind if a few people pay very low tax rates as a proportion of their own total wealth. There has to be an incentive to get wealthy in the first place… If there wasn’t, none of the companies we rely on would have been created. Also, if I was super rich, I’d trust myself to spend my own money more wisely than I would any government, and create more value with it - it’s easy to spend money that isn’t your own.
Do you have a video explaining when to sell shares held in a gia to fund an isa and the tax implications? If you have to find 10k per year to fill an isa and you have 15 years' worth available in a gia, would you sell 10k and take the tax hit on 7k of it or would you just sell 3k per year so no tax to pay until you die?
Not specifically. Remember that the £10k you sell is unlikely to all be gain though - some of it will be capital. For example, if you bought shares with £100 and they grew by 100% to £200, only half would be potentially taxable when sold.
@chrisbourne-retirementplanner cheers, Chris.
I have long said "never pay off your mortgage" yet people always think I'm just being facetious.
Something I am unclear of. The example 100k taken as a loan are invested to give both 10k and 6% return a year, that return would be taxed, wouldn't it, so 4.8% net for basic rate payer. Whereas the 6% in interests accumulates gross.
Is this considered in the example?
@@giuliovuolo1 No it wouldn’t be taxed, at least not at the rate you’ve outlined, because the £10k being taken is out of the capital that’s been loaned. There’ll be some tax on crystallised gains going forward, but the payment will still be primarily capital and therefore not taxed.
I m still not sure about this. Surely because of tax to pay on any investment returns there would still be a deficit against the loan interest payments
@ No there’s actually projected to be capital left after the first 10 years - you can see it on the comparison of future assets. It’s because the capital is being drawn out gradually… £10k taken after first year means there is more than £90k left at end of year, because of growth. Same in second year, and so forth. By the time £100k has been taken back over 10 years, there is still money left in the pot. Tax will also depend on where the growth derives from; some will be capital growth (partially covered by CGT exemption), some will be dividend (partially covered by dividend allowance).
@ Also remember the tax saved by not taking it as taxable pension income. This saving compounds and outweighs the interest in the example (figures aren’t guaranteed!)
Borrow money and invest it in shares and you win if shares outperform the loan ! You don't need a graph just an appetite for risk in your retirement. Meanwhile the loan interest is not tax deductible but the pension is taxed, sooner or later. And under IHT, pensions are double taxed possibly up to 80% but your house is only taxed at up to 40%.
Where does the money come from to buy the marbles in the first place?
@@blister6884 Yes but that tax then becomes a sunk cost. The important thing is utilising income in the most effective way to avoid staying in the same high tax cycle forever. Warren Buffett might have an effective tax rate of
Chris, wouldn't Elon's scenario be that he was paying the 5% interest every year on his loan so eventually could be over the amount of tax he would of paid
It’s a good question, but it depends on a couple of factors - what deal is structured in the first place (is loan interest allowed to roll up for example) or if not, does he keep some of the capital back to invest it in an attempt to ‘outgrow’ the rate of interest. If he kept half back for example and invested it, achieving a return that was double the rate of interest paid on the loan, he effectively covers the whole cost of the loan, meaning the other half of the loan is essentially free money.
This apply to farmers?
Anybody who owns property that a lifetime mortgage company is willing to loan against, so yes.
Did I understand the gain was £450k versus debt of £400k ish? Just not worth it for that risk.
@@wl660 It’s more to do with the tax saved during lifetime. There could potentially be IHT benefits too.
@@wl660 These figures are quite small of course, relatively speaking, but the amount of income tax paid over the first 10 years is about £18k less, and £450k vs £400k is a 12.5% improvement. Figures are not guaranteed obviously!
@@chrisbourne-retirementplanner I guess I can’t quite open my eyes to see it. I’m old school. No debt is the goal. Pay my taxes. 🤷🏼♂️
Dividend tax is 8.75% for a basic rate taxpayer.
Yes. Dividends aren’t mentioned in this video though.
Could do the same with whole of life lnsurance. Borrow against this asset and your beneficiaries will get the benefit net minus the outstanding loan amount. Rich also create foundations and place assets inside them to grow tax free; and use the money inside them to make political and charity donations, and thus gain influence and power. Think of Bill gates or Rockefeller foundations.
It's awesome
Youre CGT example seems to completely ignore that you've already paid tax on the money used to buy the assets.
Exactly
It’s a fair point, but as demonstrated at the start, when you find yourself with excess income having built assets over a period of time, and you use that excess income to buy more assets, any previous taxation is a sunk cost. Also, the assets being sold might have been inherited, and the individual may not have paid tax to acquire them.
@@chrisbourne-retirementplanner Exactly
TBH the top percentiles don't pay any tax just by being non-resessential.
I don’t understand how this is beneficial. Yes, if you take £200k as a loan and pay 5% interest it’s less than the 40% or so you would pay by taking that money out of your company, but then the £200k isn’t yours. You’ll be paying 5% per year interest and after 20 years you’ll have spent £200k on interest and still owe the bank £200k.
@@alrightlove6317 That’s only part of it - it’s more about the tax you save by NOT withdrawing money as pension. That money remains in the pension, grows, compounds, and produces a better net result as the cashflow model demonstrates. (Figures not guaranteed)
It's OK saying Elon can borrow £500m from a bank, but how does he pay this back without taking an income and this incurring income tax?
Via dividends, which are taxable but at a lower rate than income.
The capital element may not be repaid during his lifetime, the interest element could partly be serviced out of the loan that was advanced (also using other income streams like dividends as mentioned above). He may think to himself half of this advance would have been taken as tax, so I’m going to invest that amount, and if I can get double the rate of return I’m paying in interest, then the other half is costing me nothing. He thus ends up with even more appreciating assets, and is even wealthier than before. There may be an element of interest roll up in the deal as well; depends on how it’s structured.
Its easier for government to tax 1million folks $1 than one person $1million.
I'm still on Step 1: start a successful publicly traded company :D
Good luck to Wolves this afternoon
@@joeyjebouskie6632 Thank you. I think we’ll need it the way Fulham have been playing!
This is why the the taxes have being raisied
Not really worth making over 50K really.
but its easier to watch netflix, go to pub, eat unhealthy and be fatty kitten
then complain that its everybody elses fault
not even mentioning that richest are inviting you by teaching you how to do that FOR FREE
but tomorrow is arsenal playing so ill prefer to stay poor xD
edit: 4:00 you are wrong. To get 3k in PAYE you must earn NOT 3750 but add to that EMPLOYER INSURANCE as well. YOU MUST WORK THAT MONEY TOO, otherwise you would generate LOST and should be fired
why most of people believe that employer insurance is NOT paid by employee? or by customers? ergo, eventually YOU?
and seriously, noone heard of kiyosaki explainign that being in DEBT is greatest thing ever? YOU CANT BE TAXED ON DEBT
BUY, BORROW, DIE - and never pay tax
oh yeah, why people never read kiyosaki or watch rich dad poor dad channel.... yes yes, football, netflix and all other most valuable things to do
Nice to have a You Tube without the likes of Jeremy Clarkson moaning he is being potentially paying half the IHT other people who work for a living have to.
😅
Did you vote labour by any chance? Let's say jezza paid 10x the average person in tax. Did he get 10x the service and benefits from the government? I'm not remotely wealthy, but not jealous of those that have more than me. No one can justify in any shape or form taxing those that have more however they achieved there wealth legally. Governments retrospectively changing laws to prosecute those acting legally are the criminals. Spite and jealousy are tools of the weak minded.
Clarkson is a one off. Do you agree with this land grab on farming families? Would you work as a farmer for less than minimum wage? It’s an inter generational way of life that puts food on our tables. No, I’m not a farmer but respect them immensely.
Great video as always.
Farmers, always moaning yet always have enough for a new Range Rover.
You should listen to Clarkson's interview again. Won't affect him, he can afford to hide it in a trust, he was there on behalf of small farmers, don't let your anger at wealthy people cloud your judgement.
Hello everybody 😊
Wouldn't it be so much better to just leave High Tax UK under Labour, then buy an acre of land in Panama (very low tax), get a modest house built. Just visit the UK for whatever time you like, (NB. the illegals here don't declare much do they?). You'd probably have to apply for Panamanian nationality; maybe dual or give-up UK nationality.
I'm seriously thinking of selling-up & emigrating to Bulgaria (fairly low tax). I can't stand what this government are doing to the UK.
Why is step 1 always give up your (PAYE) job in these videos.
@@jaaguitar Were you watching a different video? Perhaps check out the title - it says ‘How the rich avoid tax’ - one of the ways is through selling assets as opposed to taking income. At no point does it say that you should give up your PAYE job.
@chrisbourne-retirementplanner don't think you can copy the rich. Unless you switch to self-employed and lie to Inland Revenue about your earnings. That's what it boils down to. Although Salary Sacrifice, ISA allowances etc are good tips.