Tax ISAs (and what is 'significant wealth'?)

[motorbiking]

I see you are in favour of people with the most wealth getting the easiest ride.

You haven't a clue. Do you think they just open their laptops and money squirts out?

income tax payments have become increasingly reliant on a small group of taxpayers. The top 10% of taxpayers paid 61% of all income tax in 2020–21, up from 35% in 1978–79. The share of income tax revenue contributed by the top 1% of taxpayers rose from 11% in 1978–79 to 29% in 2020–21, despite big cuts in top rates of tax in the first 10 years of that period.

Who would have thought the conservatives have taxed the wealthy more than the last labour government?

Income tax explained | Institute for Fiscal Studies

Income tax is the single most important source of revenue for the UK Treasury, accounting for about a quarter of total tax revenue.

ifs.org.uk

 

[JohnD]

You haven't a clue. Do you think they just open their laptops and money squirts out?

What strange ideas you have. Do you think that's how workers receive their pay?

Have you heard of "Income Tax?"

What do you think "Income" is?

Did you know that your bar chart illustrates the huge and growing disparity between wealth of rich and poor?

 

[motorbiking]

From 6 April 2023, the amount of profit you can realise on your investments without incurring a CGT bill is in most cases set to fall from £12,300 to £6,000.

Plus this unless other rules change which appears to add other taxable income into the sums

Capital Gains Tax: what you pay it on, rates and allowances

What Capital Gains Tax (CGT) is, how to work it out, current CGT rates and how to pay.

www.gov.uk

A subject that interests me as we have a holiday home that we should have sold some years ago really. My wife and I may make a gain of about £70k each when it is sold taking us well out of basic tax rates. As retired neither of us have much of an income That for ~20 years of ownership and paying out running costs. Ok ~5k or so of maintainance can be used to offset tax but that's about it. It was initially bought via an inheritance. Cost ~£60k.

You are aware that its only the excess that is taxed at the higher rate?

 

[motorbiking]

Did you know that your bar chart illustrates the huge and growing disparity between wealth of rich and poor?

If you read the article - they disagree.

The reasons for the increase have changed over time: before 2007 it was driven mainly by rising income inequality, whereas since then it has been driven more by policy choices.

Those bl**dy Tories taxing the rich to fund the poor.

 

[JohnD]

higher rate?

Funny thing about Capital Gains tax and Dividend Tax

Guess which is higher

Top slice of Capital Gains tax if you make £27 million on an investment (and your attempts to hide it through a network of offshore accounts and connected parties are unsuccesful)

Top slice of Income Tax if your receive £52,000 in dividends

Top slice of Income tax if you work hard, do overtime on your "rest days" at the insistence of your employer, and are lucky enough to earn £51,000

And guess which of those three people pays National Insurance as well as tax.

 

[JohnD]

Those bl**dy Tories taxing the rich to fund the poor.

But giving the rich an easy ride.

 

[JohnD]

Funny thing about Capital Gains tax and Dividend Tax

Guess which is higher

Top slice of Capital Gains tax if you make £27 million on an investment (and your attempts to hide it through a network of offshore accounts and connected parties are unsuccesful)

Top slice of Income Tax if your receive £52,000 in dividends

Top slice of Income tax if you work hard, do overtime on your "rest days" at the insistence of your employer, and are lucky enough to earn £51,000

And guess which of those three people pays National Insurance as well as tax.

Answers:

1) 20% top slice
Total tax £5,397,413 (calculation can be more complex)

2) 33.75% top slice
Total tax £3707.63

3) Top slice 40%, plus NI
£7,832.00 income tax and £4,907.93 National Insurance.

Bonus answer:
If you receive £52,000 in dividends from shares held in an ISA
Tax is £0


No doubt motorbiking will tell us this is all completely fair.

 

[ajohn]

Those bl**dy Tories taxing the rich to fund the poor.

You need to consider this chart from it as well - noting numbers of people

Also consider other taxes that are paid that only loosely tie to income other than it is assumed that income directly relates to what people buy or rent etc.

 

[ajohn]

A more interesting factor that increases effective income tax for one particular band that then reduces as income increases.

The personal allowance is gradually withdrawn from individuals with incomes over £100,000 a year, creating an effective 60% tax rate on incomes between £100,000 and £125,140. In a similar fashion, families receiving child benefit have it withdrawn when the highest-income parent’s income exceeds £50,000.

 

[JohnD]

A person earning £125,140 will pay £42,516.00 income tax and £6,931.33 National Insurance.

You'll notice that his National Insurance rate is lower than the person earning £51,000

However, an investor receiving £125,140 of dividends would pay £32,634 of income tax, and no NI

Unless he held his shares in an ISA, when he would pay £0 tax and £0 NI

 

[Mottie]

Funny thing about ......Dividend Tax

Do you think its right that you pay neither on the first £2K of dividends and a lower rate starting from 8.75% and no NI on anything after the first £2K?

Say, didn't you boast of a dividend payment on those shares you hold? How fortunate for you! Isn't that 'tax avoidance'?

 

[ajohn]

Interesting read anyway Mr Bike. Interesting comment near the end
Income tax is not the whole story, of course. While it is by far the UK’s biggest tax, it still only accounts for a quarter of revenue. The next two biggest taxes, National Insurance contributions and VAT, are much less progressive, while some smaller taxes such as capital gains tax and inheritance tax fall even more heavily on a small group of the very well-off.

 

[diy_fun_uk]

Touching on my opening post, I find some of the views around this quite interesting. I get the fact if someone can afford to put away £20k each and every year into an ISA, they're in a minority re people that can afford to do this. However a couple of points. Not everyone that puts money in an ISA can afford to do this, many will put in less each year, sometimes significantly so. I also come back to my point re priorities. Again, before anyone starts, of course there are those who can't realistically save. However, for others, they perhaps sacrifice on some things so they can save.

If people do this for x years and build up an ISA value of £100k+, I think it's an interesting concept to refer to them as being significantly wealthy when the ISA amount they hold might be due to years of not doing other things e.g. bigger house, new cars, big holidays etc. That's the bracket I would fall into.

So, if you're prudent and save into these schemes, the think tank is proposing yet another tax.

Standard ISAs aren't really where it's at these days in terms of interest gained, better non ISA routes out there. I'd better not mention Stocks and Shares ISAs, that'll put some on here over the edge

 

[Justin Passing]

You're showing yourself up John by trying to cherry pick to get tendentious impressions.

EG you quote ISAs as though they're some tool of the rich. Bullshít, they're just to encourage people to save and invest. ISAs aren't any good for the wealthy. If you'd put the max you could in, every year since their inception, you'd have less than 250k . Chickenfeed compared with a wealthy investor's balances.
Plenty on this forum speak of their "renters", plural. You don't get many renters for 250k, do you.
Like everyone else. I use the opportunities which are easiest to use. just lilke you do JohnD. You're coming across as a hypocritical envious jerk trying to portray a right-on hippy ethic, frankly.

 

[Mottie]

I'd better not mention Stocks and Shares

My mate put exactly £1,000,000 from his sale of the MOT station into shares just before the pandemic hit. Invested it through Coutts. Supposedly took the low/medium risk option. In the first year it went down to....£860K! Ok, it finally recovered after the pandemic to just over £1,060,000 and he took the £60K as 'wages' but he was pooping himself for a bit!