I’m a tax adviser to millionaires and billionaires. AMA.

[LetsTalkTax]

I advise rich people on their tax affairs. With all the posts today of people outraged by Vinted being taxable, I thought it might be a good time to do an AMA and dispel some of the myths posted about the tax that rich people don’t pay.

Only from personal experience as my clients could never in a million years get to a taxable number that low 😂

But having a personal pension is key. Then in December map out all of your earnings for the tax year, know how much headroom you have left and pay anything you receive over that into a personal pension. Personal pension is better than an employer one as you have more control over when contributions are made and if you want to make a one off extra payment much easier to do that way than through payroll.

Or charitable donations, but they’re unlikely to move the dial if you’re earning close to £100k and have childcare costs to fund.

What sort of celebrities do you advise? Don't they say that someone like Elon Musk, and most of the Really Rich, utilises tax avoidance, pays minimal tax because he has it set up so that for example he doesn't actually take Dividends.

No moral injury, as it’s not about finding unintended loopholes. I use the rules that the government has specially drafted and HMRC’s own guidance. It’s extremely unlikely that anything I implement now could ever be challenged in future as I use the rules as they were intended.

There’s a lot of work now in unwinding old tax schemes as they just don’t work, and there is very little of the loophole stuff done by legitimate advisers (follow Dan Neidle on Twitter if you’re interested, he decimates a lot of advisors who do this by explaining why they are wrong and that’s not how tax rules work).

It’s up to the government to set the rules, I just implement them.

I don’t see what I do as any different as Joe Bloggs opening an ISA. It’s on a bigger scale, but there is no moral grey area.

What are your best tips for sole traders? I’m not talking about avoiding tax, but making sure you aren’t overpaying or paying when you shouldn’t be.

Good. I used to be freelance and once had to tell a client that if he wanted to fiddle his VAT, then I certainly wasn't going to help him do it! He wasn't best pleased, but I wished him good riddance luck with finding someone else to do it and waved a cheery goodbye.

I’d say at least a quarter of the Sunday Times Rich List. I’m not naming names as that would get me sacked. Most of the names aren’t household names, but are the wealth behind household brands.

And I don’t quite follow your sentence, but Elon Musk’s wealth is mostly in stocks which aren’t spendable, and he’ll pay tax on selling them or getting dividends. However a lot of the rich just take loans against their wealth so they get cash but don’t have a taxable event and pay interest instead.

Not really my area of expertise. The only sole traders I am involved with are farmers on landed estates. Almost every client I have incorporates their trading activities as they want control over when they receive and are taxed on the income as they often don’t need it day to day.

I couldn’t tell you the rates for basic rates of tax without looking, for example, as all my clients are in a 45% tax bracket and so anything below that isn’t relevant to my day job.

Do you like your clients? Are most if them generally nice people?

This is EXACTLY why I started this as I saw a loopholes post on another thread.

Feel free to jump in on any questions 😂

Yes. At least half of my clients are self made and come from relatively humble backgrounds, and even those that don’t are generally nice.

There’s been a few examples where this isn’t true, but it’s no more the case than in the general population!

@jobwantednotneeded you left out this bit though

“Our recent research shows there’s a lot of variation in the taxes paid by the rich. Most of the revenue from the top one per cent comes from a cohort of high-earning employees, who pay the often-quoted top rate of 45 per cent income tax plus two per cent national insurance contributions, with minimal deductions or reliefs. But a substantial minority pay much lower rates, especially taking into account capital gains, which offer an alternative way of taking rewards, mainly for the richest.”

There is a big disparity between paye & other taxes

OP (or any of the other tax advisors) are you ex HMRC?

What's the biggest tax bill you've ever had a client liable to pay in one year?

I find stock markets and investing so fascinating but I'm basically innumerate, the merest sentence about allowances/liabilities and my brain literally goes into gridlock. I find the level of understanding of tax rules that you must have somewhat akin to witchcraft.

What do you do if you discover your client is attempting to do something dodgy?

No, and no one in my direct team is - but there are others who work for my company that are.

We generally have good working relationships with HMRC though, and do this enough to be able to anticipate their courses of action just through seeing how they operate over many many years!

Tell my money laundering officer and await their guidance.

I’ve had a client insinuate they would do something dodgy before now and had to have a meeting to tell them if they did that I would resign as their adviser.

Ha, interestingly is mostly words and law and very little numbers!

Off the top of my head, I can recall a client paying £15m of tax in a ‘normal’ year (so no one off big events). I’ll have definitively seen bigger than that as I’ve seen £500m+ sales before, but honestly the numbers don’t really matter - I spend my time making sure the analysis behind them is right.

Has the tax philosophy for foreign billionaires changed over the years in relation to sources of income. Or is it just few high profile cases but underneath all of the wealth is welcomed no matter how dirty?

If you had the power, are there any tax relief practices you would change/add, if yes which ones and why.

This is true, one of my clients that I’ve been looking at today has about a 30% tax rate on income of £1.5m. But he makes some tax efficient investments which have reduced his tax bill, some is dividends at the 39.35% rate and some is capital gains at 20% rate.

@LetsTalkTax too much disparity imo!

Where are the rich parking their money still property or more weight against gold, stocks etc? UK market or global?

I’d start again with inheritance tax as it’s quite antiquated.

I’d get rid of corporation tax entirely and increase tax on dividends (so there’s an incentive to reinvest).

I’d keep domicile rules as they are (the Rishi’s wife rules), as I don’t think it’s fair to tax visitors to the UK on their non-UK income when they’re not staying here permanently.

I’d get rid of the personal allowance taper and childcare removal at £100k as those people aren’t that wealthy and it’s a very expensive tax rate (for some people up to 99%).

Global stocks mostly. Usually quite balanced portfolios. And property, probably more commercial than residential nowadays I’d say. I’ve only had one client who bought up significant gold reserves.

I only really do UK tax and so only really have experience of UK ultra high net worths.

I’d say attitudes have changed, there is more of a desire to be compliant than avoid tax at all costs.

There were a lot who made steps to move overseas when a Corbyn government looked possible, but not so much now a Starmer government is likely.

I dream of owning a panda one day. would I be able to offset the purchase against my taxes? and would I qualify for child benefit if I got a cub?