High earner leaving UK because of tax

[DonningDaFlameProof]

Hi all,

I'm well aware that I'm highly likely to be utterly slaughtered for this (thus the name change) but having read the thread about Corbyn and seeing several people saying that the theory that taxing high earners would make them leave the economy is a myth, I thought I'd share.

I'm British and was bought up on the breadline, went to state school, have a disability - just to pre-empt the "privileged" comments.

I started a business not that long ago (fortunately selling a service globally, and not registered in the UK as its main market is the Middle East) in the first few months it became obvious it was going to do well and I hired an accountant.

To cut a long story short, if I remained UK resident then my tax bill for my first year would have been approximately £120,000. This would have been just under half of the money I bought in.
Year 2 - tax bill would have been £230,000.

My family are not well off, so I was supporting a fair few people on this plus I started with nothing, so my first priority (after my family) was to save for a house as I was living in rented accomodation.

I am well aware that I am earning a high salary, and would never argue otherwise. But reading on here, people seem to think that a 6 figure salary means that you buy yachts for a laugh and eat diamonds for breakfast.

Good size family houses in my area started at about £500k.

For us, it made sense to move abroad for 5 years or so, save the money otherwise spent on tax, come back with that lump sum and buy a property outright.

And that's what we've done, it was insanely easy.

Now, the current plan is to come back to the UK in a few years time and settle down. We'll have a nice house then, and the tax bill we'll just suck up because we like the UK.

I keep seeing people harp on about raising taxes for the wealthy...if this happens, I know that we won't end up moving back. Because paying out half of my earnings is galling enough.

The top 10% of earners pay 60% of the tax bill.
The top 1% of earners pay 28%.

These people will also be privately funding their own medical care and schooling for their children. They'll also be heavily contributing in other taxes and of course pay VAT on the things they buy.

Raising taxes, abolishing private schools, penalising the wealthy in other ways is just going to drive them out of the country - leaving the tax pot far emptier, but the majority of people still relying on it.

AIBU to think that penalising the wealthy is not the solution?

Businesses person whose main market is in the Middle East moves to the Middle East to save tax... oh no, the UK's doomed 😆. OP I don't think your post proves your point. Most UK high earners won't be able, or won't want, to move to low tax jurisdictions.

Your ridiculous, contrived tax calculations about how much you 'put in' vs how much you 'took out' are breathtakingly naive, arrogant and ignorant.

Are you paying any tax at all in your current country of residence?

Do you have a decent accountant who specialises in non-resident tax and have you taken the time to understand the full implications, rules and complications of this?

I think we should be like the USA in that citizens need to pay UK tax regardless of where they live in world.

No tax= no citizenship.

Bye!

If paying more tax makes the country run so much better.

What happened when the basic rate of tax was 33.3%. And those high earners that stayed were paying 90%

Nobody can say the 70s was brilliant.

Not a supporter of tax evasion but did want to include a little clarification.
Once you hit the 100k threshold, for every 1£ you lose 2£ of your tax free allowance.
The amount you can save tax free into your pension pot also reduces once you hit the 150K and essentially gets down to 10k from 40k.

OP yanbu

Most UK high earners won't be able, or won't want, to move to low tax jurisdictions.

This is a very naive comment. I think you’ll find they can and will. Most of ‘the city’ will move out for a start taking their highly paid, highly taxed employees with them.

We fall into this category, already paying highest tax, using private schools and private healthcare. Almost every parent we know at DCs school could move overseas, and many would be forced to because their company would move out of the UK.

I don’t see how moving overseas to avoid tax is any more immoral to setting up a company, paying yourself the lowest salary possible to avoid tax and NI, but taking dividends only taxed at 20%, or accepting cash payments which aren’t declared.

I think you’ll find they can and will. Most of ‘the city’ will move out for a start taking their highly paid, highly taxed employees with them.
@dobedobedobedoo

that's interesting.

Can you tell me which these countries are, that have highly-developed Financial Services centres; good public services, low taxes, a safe environment, and good living conditions?

I'm thinking Frankfurt, Paris and New York. Do you have in mind another?

It will be interesting to compare pay, conditions, and taxes.

Anyone mentioned Laffer curve yet? If I remember correctly high level or taxation at some point reduces total tax collected by government as more people try to avoid it by cheating/moving to other places/reducing their earnings

Right. I mean, you don't have to be an economist to get that there is obviously a sweet spot, but you do have to be quite narrow-minded to believe we must be at that sweet spot right now and that any change either way is going to result in lower taxation.

The average citizen (in other words everyone in this thread) should be in favour of reaching that sweet spot. It can only benefit the country.

All political parties will also be trying to achieve that, albeit to a slightly lesser extent because political parties are always beholden to the people that put them in power. That means that all parties will have economists and experts trying to calculate the peak of the laffer curve where the government can make the most money from tax, but that Labour will likely err on the side of taxing the rich more (because it pleases their voters) and the Tories will err on the side of taxing the rich less (for the same reason).

The difference to the average citizen is likely to be minimal to non-existent either way, but the media—run by the mega-rich—is very good at convincing average workers that this stuff is going to ruin their lives.

Don't forget that tax take from the highest earners dropped when Labour increased the highest rate to 50% and then increased when the coalition reduced the highest rate down to 45%.

Labour is just playing media games to attract the lefties who want to punish the rich. They're not doing it to raise tax revenue and make a fairer country - just wanting to scratch a few votes together.

They've got form for it - after all, Blair deliberately didn't put controls on Eastern European countries (as other EU countries did), to "rub the nose of the right in diversity".

Only the bottom 10% buck the trend: they pay about 47% of their income in tax.

Yes those earning under £12,500 pay no income tax at all seeing as the Tories have doubled the tax free personal allowance. And those earning more than £12,500 have seen more of their pay taken out of income tax.

Yes those earning under £12,500 pay no income tax at all seeing as the Tories have doubled the tax free personal allowance. And those earning more than £12,500 have seen more of their pay taken out of income tax

Whilst at the same time removing in work benefits, rising council tax way above inflation and removing CT support.....

Labours 50% rate was only in for a short time, not long enough to get accurate figures on whether it was a success or not.

Oliversmummy the 90%+ tax rates were only for certain unearned income, affected a tiny number of people and had been in force since WW2.
the higher rate at 83% was of course way too high, then again, your local council leader didn't earn more than the PM!!

Things were bad in the 70s primarily because OPEC increased oil prices by 300% and many public services are terrible compared to then, esp roads and council services.
NI has increased significantly too.

YANBU. There is only so much than you can tax so called “rich” and “middle class” people before they will leave the country. These sections of society are highly mobile.
Just to come back to a previous poster, in my day my mother did not receive any child benefits- it was done as tax relief on my father’s income. (Which he promptly spent down the pub.)
The schools were notoriously poor in our area and so, if you could afford it, you were sent to a fee paying day school. Also the nearest GP was 9 miles away and we didn’t have a car. We really did not benefit from the huge amount of tax that was taken out my parents’ salaries.

Maybe we should stop paying people ridiculously high wages? Then you won't feel 'picked on'.

OP's story sounds so much like a hypothetical made up scenario.

Either way I have some sympathy on OP's viewpoint, in as much as I don't think income tax should be further increased.

Though I do think that raising more taxes to better fund a welfare state would be welcome. IMO dividends should be taxed at the same rate as salary income (would help to close some of the loopholes a lot of self-employed & contractors use) and inheritance tax thresholds should be lowered.

Quite from another thread

"Every time you invest in something, you benefit.

Yes the world is unfair. Get used to it. That's human psychology. This is not sleazy. It's a fact."

All the lefty's need to get over themselves, the jealousy of what other people earn is shocking.

Having just popped over to the Wikipedia page that breaks down UK government expenditure, about two thirds of it is spent in ways that have a direct benefit to potentially identifiable individuals, and that could be hypothetically replaced by those individuals fending for themselves. (Provided that we define fending for themselves to include not doing so because they're unable to.)

While I wouldn't necessarily abolish or reduce those categories of spending, it does make a nonsense of the claim that tax funds infrastructure on which prosperity depends. Based on the high-level pie chart, two thirds of tax is a redistribution of funds from those who have more to those who have less, only a third goes on the rest.

en.wikipedia.org/wiki/Government_spending_in_the_United_Kingdom

The two thirds I've totalled consists of:-

31% "Social protection"
19% Health
13% Education
4% Personal Social Services.

If you want to oversimplify where UK tax is spent, it is more truthful to say it is spent on redistribution than infrastructure. Then you'll only be ignoring a third of the spending, rather than two thirds.

IMO dividends should be taxed at the same rate as salary income

Ironically, it's the Tories who are working toward that. More ironically, it was Labour that created/worsened the disparity in the first place!

The Tories introduced the extra personal "dividend" tax of 7.5/32.5% payable on the recipient, AFTER the company has already paid the 19% corporation tax, so the total tax on the profit distributed to the company owner is now 25% for a basic rate taxpayer and 45% for a higher rate taxpayer, so now far closer to the tax/nic payable on the same gross income for an employee.

The Tories have also grasped the nettle re "personal service companies" to stop the low wage/high dividend loophole for "disguised employees" and beefed up IR35 which was first badly introduced by Gordon Brown 20 years ago.

So two major tax rule changes by the Tories to close "loopholes" which had been created/facilitated by Labour. Ironic really when everyone thinks it's the Tories who are the tax cutters! Tax avoidance/evasion rose massively under Labour who chose not to do much about it!

Then it's the Tories again who've tackled the "loan" schemes widely used by contractors, but also well known TV slebs (Jimmy Carr), footballers (Glasgow Rangers) and Pop stars (Robbie Williams). Those loan schemes became common place under Labour's 13 years of mismanagement and they chose to look the other way.

So that was a third "loophole" attacked by the Tories which started under Brown's watch.

All the lefty's[sic] need to get over themselves, the jealousy of what other people earn is shocking.
Ignorant and uninformed comment.

I knew somebody a bit like you op. Grew up on benefits, did university then phds in the UK, all for free, then moved abroad to low tax country. Lived abroad all his life, very high earner and spender, never saved or bought a house. Married abroad, had child. Moved back to the UK aged early 60s because he had cancer, lived in rented accommodation (paid for himself not hb) with much younger wife and primary school aged child, wife was university student. Had cancer treatment on NHS, child in state school. Lived about five years in UK all the time having NHS cancer treatment and carers towards the end. I don't think he paid a single penny in UK income tax despite earning a six figure salary all his life. He just saw the UK as somewhere to look after him when he needed it. When he died he left his wife about £20,000, that was all he had.

Oh, did I mention he also voted Leave because of too many immigrants here and abandoned his first child, never paying the mother a penny in maintenance.

YANBU high taxes lead to reduced productivity. The UK already has a problem with productivity compared to most of the other G7 countries.

What is the point of working your arse off, building a business, employing staff taking on the risk of their livelihood as well as your own. To be taxed more because you are a higher earner?

There is no point!

I agree in taxation it’s important for society but there is a sweet spot to maximise revenues, encourage enterprise and job creation, before we enter “robbing” the rich to pay for the poor territory.

high taxes lead to reduced productivity. The UK already has a problem with productivity compared to most of the other G7 countries

Yet has v low business taxes.

Productivity has as more to do with investment, motivated workers and proper numeration.
Germany and France have far higher business taxes, far higher productivity.

Lived about five years in UK all the time having NHS cancer treatment and carers towards the end. I don't think he paid a single penny in UK income tax despite earning a six figure salary all his life. He just saw the UK as somewhere to look after him when he needed it.

Sounds more like we need better controls on who is allowed to live in the country and who is allowed to take advantage of our generous benefits, free healthcare and free education systems then, doesn't it??

@familycourtq why is it ignorant? Every time I mention my DC are privately educated and we have private health care in flamed for it!

It's what I choose to spend my money on, why can't people respect that?

I don't spend it on sky TV, booze and cigarettes.

Why is it ignorant? All labour lefty's do is fucking moan about rich people.

People can argue about the moral rights and wrongs of OP's approach but that does not change the fact that this is how many high-earners behave.

Ultimately most people are out for themselves and if wealthy people do feel like helping others they prefer to do it on their terms via charitable donations etc, not mandatory taxation.

Under a Corbyn government, many high net worth individuals will base themselves outside the UK with barely a backwards glance and the UK will lose their tax revenue altogether.