Two thirds of millionaires 'left the country' following 50p tax rate

(38 Posts)
joanbyers Wed 28-Nov-12 14:07:33

No surprise really:

www.telegraph.co.uk/news/politics/9707029/Two-thirds-of-millionaires-left-Britain-to-avoid-50p-tax-rate.html

Apparently the tax increase cost £7 billion.

From what I understand most millionaires don't even want to pay 40% tax, let alone 50%.

Pretty stupid.

MoreBeta Wed 28-Nov-12 14:14:46

They didnt necessarily leave the UK. They may have just restructured their income to make it 'capital gain' rather than income or received it as dividend (with a tax credit) or even chanelled pay through an offshore company.

That said, once your income tax goes above 200k it really is worthwhile looking at moving to a low tax jurisdiction. This is especially true if you can work online and do not have to be physically present in the UK to do your job and can just fly in and out.

The internet and increasing use of mobile communication means that high skill, high pay people who deal in money and information and not physical products can easily move between tax jurisdictions to legally avoid tax.

OutragedAtThePriceOfFreddos Wed 28-Nov-12 14:24:53

This really isn't surprising.

What is surprising is that the government didn't see this happening from a mile away, it's basic common sense that people who are having the piss taken out of them won't stick around.

somebloke123 Wed 28-Nov-12 14:28:05

And the last Labour government agreed too, which is why they didn't introduce the 50p rate until very late on, and then only to set a booby trap for the incoming Tories, who they knew would find it politically difficult to abolish it.

KarlosKKrinkelbeim Wed 28-Nov-12 16:27:36

I sympathise. Having just had one of the most soul-destroying conversations of my life with a representative of HMRC, I'm not far from following them, despite being very much not a millionaire.
It was, as somebloke notes, a truly cynical stunt by the last government. But the cynicism and amorality of Labour never cease to amaze. I read Chris Mullins' diaries recently - and bear in mind he was supposed to be one of the elder statesmen, men of principle etc - and when Lehmans collapsed what was he doing? Wringing his hands over imminent meltdown? No, gloating at the discomfiture of Tory free-marketeers. Loathesome.

TalkinPeace2 Wed 28-Nov-12 19:18:11

Absolutely no evidence in that story that anybody moved countries
just that they adjusted their income - as is entirely feasible and practical for those earning that much.

NON story

OutragedAtThePriceOfFreddos Wed 28-Nov-12 19:38:40

If they didn't leave the country then they did something else to reduce their tax bill. I should imagine that HMRC, even as shite as they are, can tell how much money they have received from HRTs each year.

TalkinPeace2 Wed 28-Nov-12 19:42:09

Yes, of course they did.

Lots of people moved income forward the year before because of the CGT changes as well
and high earners are not paid salaries, they are remunerated and decide how where and when

I look at how much I feel like paying in tax and then decide my earnings ......

KarlosKKrinkelbeim Wed 28-Nov-12 19:45:05

erm, there are plenty plenty people (the majority, I believe) in the top band who are paid salaries.
What a lot do - and what I will do on the happy day my salary nudges into this bracket, if it ever does - is sacrifice a chunk into pension. I would imagine the great majority of salaried bods in the top band will have done this. not really a win for the revenue.

TalkinPeace2 Wed 28-Nov-12 19:50:46

true, sorry, typing one handed with cat on lap
but yes, pensions, expenses, all sorts of ways to avoid a tax rate that was telegraphed well in advance

Karlos that is what a lot did, but that only protects £50k p.a.

TalkinPeace2 Wed 28-Nov-12 19:55:04

but you are allowed to top up prior year pensions etc etc
LOTS of ways round things

as I say
NO evidence that ANYBODY left the UK

KarlosKKrinkelbeim Wed 28-Nov-12 19:59:35

Isn't the crux of the matter not so much the leaving the UK, but the fact that a measure that was promoted as something that would raise more revenue has actually done the reverse? (as was widely predicted)

You can only go back three years at a time if unused at £50k p.a., so only a maximum contribution of £150k in any three year period.

milkshake3 Wed 28-Nov-12 20:05:10

I know someone who left the uk because of the 50% tax rate and took all his money with him.....

TalkinPeace2 Wed 28-Nov-12 20:07:31

where to?

as after all, only the UK is dumb enough to have 'non dom' status

DowagersHump Wed 28-Nov-12 20:09:19

Yes - let's keep loads of millionaires here and make them pay tuppence ha'penny on their tax.

Why?

No other countries do

breadandbutterfly Wed 28-Nov-12 21:19:58

Wish they had left. good riddance to bad rubbish. If they don't wish to pay their way then they can go somewhere else and not pay their way there instead.

Himalaya Wed 28-Nov-12 21:21:40

Except it hasn't driven millionaires out of the country.. The figures are here

What happened was a massive and one off exercise in tax avoidance as people "forestalled" income into the previous year to avoid paying tax.

Don't you think we would have noticed if 2/3 of really rich people had left the country ?

PortoDude Wed 28-Nov-12 21:23:38

Everyone in Belgium on more than 30k pays 50% tax. I nearly had a fit when we moved. Everyone didn't move though...

KarlosKKrinkelbeim Wed 28-Nov-12 21:25:09

Plenty of people (and companies) relocate to lower tax regimes, this is not a new thing. The question is whether we as a nation can afford the sort of silliness indulged in by breadandbutterfly above. I rather think we can't. We need to be pragmatic about tax.

milkshake3 Wed 28-Nov-12 21:26:26

He went to a tax haven. I thught he was mad to make a decision to put money before friends, family and life in general.....after all you can't take it with you, and he's now on hs own with his wife in a country where he can't speak the language. Agree with what breadandbutterfly said

niceguy2 Wed 28-Nov-12 21:32:41

I do wish papers would stop printing such biased nonsense. Of course 2/3'rds of our millionaires didn't just leave Britain. It defys common sense to even suggest it.

What has in reality happened is people have understandably done what they can to minimise the tax they pay.

The 'temporary' 50% tax band was a stunt. A political booby trap which in my opinion was fantastic bordering on political genius.

It played nicely into your traditional Labour supporter and was something your average voter wouldn't be bothered about. Certainly nowhere near enough to write to their MP. At the same time it would be politically impossible for the Tories to remove but Labour could if they'd have won the last election by reminding people they'd said it was temporary all along.

The downside of course is that Labour firmly put politics above national economic interests. It makes absolutely no sense to have a 50% tax band since it raises at best a paltry amount but drives people to avoid it and/or not bother coming to our shores in the first place.

TalkinPeace2 Wed 28-Nov-12 21:37:22

well frankly I wish the UK would get rid of "non dom status"
and make some of those buggers leave.
No other country has it.
They pay taxes to the other countries, and the UK misses out.

Abolish non dom tomorrow
if they want to move to Doha, let them, but the wives will not move ....

mercibucket Wed 28-Nov-12 21:57:10

Oh we all know they don't pay tax like normal people, come on! They've just 'fiddled' or ' used legitimate tax avoidance schemes' or a mix of the two

mercibucket Wed 28-Nov-12 21:57:10

Oh we all know they don't pay tax like normal people, come on! They've just 'fiddled' or ' used legitimate tax avoidance schemes' or a mix of the two

edam Wed 28-Nov-12 21:57:18

Is the UK really the only country that grants non-dom status?

TalkinPeace2 Wed 28-Nov-12 22:01:10

edam
yup
the IRS find it really astounding what HMRC let people get away with ....
as do other tax authorities
time for it to go ....

edam Wed 28-Nov-12 22:09:11

Wow, I had no idea we were alone in this. Discussions about non-doms and whether they pay a fair share never mention we are the only country in the world that is so generous to the rich...

edam Wed 28-Nov-12 22:18:34

For anyone else who is surprised that the UK appears to be uniquely generous to rich tax-dodgers, a quick google plus wiki seems to back up what Talkin says. (Not doubting you Talkin, just astonished and wanted to find out more.)

Interesting that Germany taxes people on their worldwide income. Why can't we? We have been told for decades that we should model ourselves on Germany - their only economic flaw appears to be the Euro. Which is a a pretty big flaw, tbh, but completely different issue.

TalkinPeace2 Wed 28-Nov-12 22:20:28

grin
not in the least bit offended that you checked.
if more people realise it, they might start to put more pressure on our politicians to grow a pair

FastLoris Wed 28-Nov-12 23:30:21

A small amount of actual thinking shows that none of this makes any sense.

The 50p tax rate, we're told, apparently resulted in the rich paying LESS tax than they were before. But hang on: according to tory economic policy that aims to keep private wealth in private hands and let those individuals decide what to do with it, shouldn't this be a GOOD thing? Hell, it's even a double bonus because the tories could have kept the 50p rate and claimed to be supporting the poor via redistribution, while secretly knowing that it was really benefitting their own. So why on Earth would they then scrap the rate?

The claims that "the 50p rate needed to be scrapped because it was penalising the rich", and "the 50p rate needed to be scrapped because it wasn't raising any money" are absolutely mutually exclusive. They simply CANNOT both be true. Yet these are the two claims that have been consistently presented, side by side without a hint of irony, in the right wing press. It's a testament to the pathetic state of the lower tier of our two-tier education system, that noone in charge of that press felt the need to worry about critical thinking being applied to them by the gullible public.

niceguy2 Thu 29-Nov-12 00:34:11

I don't think they are mutually exclusive. People are more incentivised to organise their tax affairs so that they don't pay the tax (eg. higher pension contributions or a tax avoidance vehicle) In this case the rich pay less tax but don't really suffer as such because the money is still there for them.

It does 'penalise' them or more accurately I would say they feel more penalised. 50% tax is psychologically important as it crosses from being a high rate to seeming like a punitive rate. The feeling you get is that you are being penalised for being successful. A good friend of mine is a high earner and touching the 50% bracket if he has a successful year at work. But he doesn't consider himself to be rich at all. Fortunate yes. Rich, no.

Lastly as I've said before the higher the top tax rate, the bigger the disincentive to work. I've experienced this first hand when offered overtime at work. By the time I worked out how much I had left after NI & HRT tax it simply wasn't worth it. I'd rather spend time with my family instead. So apply this to your 'rich person' who typically will be a decision maker. Especially a small business owner who puts his own money into the firm and takes the risks that go with it. Would you do it? Pump more money in when over half of it will be taken from you if you succeed. But get nothing out if you lose?

DowagersHump Thu 29-Nov-12 09:29:33

I'm not really sure what relevance the anecdotal evidence about your friend has niceguy.

It's neither here nor there that he doesn't consider himself rich if he's earning over £150k, that is a vast sum compared to what most people earn in the UK.

And while I can see that being pushed over into the 40% tax band might make some people think about overtime, it is irrelevant to a small business owner as they will pay themselves with a combination of salary and dividends, with dividends forming the bulk of the income to avoid paying income tax on their earnings.

Iggly Thu 29-Nov-12 09:30:44

So who were these people that left then?

I don't believe it for a second.

I reckon they moved their money but very much doubt that they relocated.

Iggly Thu 29-Nov-12 09:32:30

A good friend of mine is a high earner and touching the 50% bracket if he has a successful year at work. But he doesn't consider himself to be rich at all. Fortunate yes. Rich, no

^^ that attitude demonstrates just how out of touch some people are.

Thistledew Thu 29-Nov-12 09:33:27

Oh gosh. People with more money than they will ever spend being asked to share it with people who don't have enough. The poor lambs. No wonder they just had to leave.

niceguy2, you are quite right in your analysis.

Higher-rate taxpayers can choose to effectively defer a portion of their income to a future date, when the tax-regime may be more favourable, or they move to a different tax-jurisdiction.

It will be interesting to see if Osborne buckles to the LibDems and further limits the tax-relief on pension contributions on the 5th.

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