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?

The middle class will be further downgraded

How are you defining 'middle class'?

The median income in this country is not very high.

You arent paying out half of your earnings OP at all... 40% are not yours to begin with. They are tax. Try working on the basis of what is actually 'your' money and live within your means. Bump your prices up if you want more.

DoctorAllcome

Because lots of people dont understand how the tax bandings work. They see 45% for 150k plus, and assume its 45% of all income.

Although, you'd expect someone actually earning that amount to know this...

As everyone else has said, you've benefited from the tax system now it's your turn to pay in. The only point I agree with you on is that people expect anyone earning above about 80 000 to be rolling in it and I agree, that's completely not the case. But that's an aside.

High taxes DO change behaviour.

Just look at the current problem with GPs. There's already a shortage but some are actively chosing to work fewer hours so that they avoid the penal taxes on their high pension funds and avoiding the 62% punitive tax charge on their earnings over £100k. Just making the shortage worse, all because some political soundbite to "tax the rich".

Same with child benefit tax. People are deliberately not taking promotions/overtime so their wages don't breach the £50k threshold.

"Because paying out half of my earnings is galling enough."

OP, can you please explain why it's half? Sorry, I don't know about how company taxation works etc.

Mostly when I think of people paying more tax, I think of loopholes being closed, and people who are getting millions of pounds salary, not a company, so I don't know what to think of as your personal income figure.

Because of greed, they’ll never think whether it’s fair that those right at the bottom lose half of their earnings to tax

Those right at the bottom pay no income tax whatsoever on the first 12,500 of their income, thanks to ... the Conservatives! So I’m not sure where you’re getting this “half their earnings” guff from.

I'll humour your disingenuous post for a moment.

You pay tax on profits not turnover, i.e. After deducting all your costs.

So if you are correct that your effective tax rate can be taken as just under 50% (Can we see a tax calculation?) then your PROFIT after tax would have been £120,000 in year one and £230,000 in year two. Assuming your accounting year matches the tax year.

So £350,000 sitting in your pocket after only two years.

And you would like us to believe you're not well off and could never have afforded a £500k house?

Yeah, okay.

(By the way, congrats on your astronomical business growth from zero. It's so impressive it's almost like it's fictional.)

To the best of my knowledge, there's research suggesting higher taxes have a mixed impact on behaviour. It makes some people work harder to get the money they want, others think it isn't worth it. I'm not a high earner and wouldn't leave the UK simply on tax grounds, but I have in the past chosen to work less because the amount I'd be left with after my costs wasn't enough to bother. It happens.

Sooner or later we're going to have to stop taxing income so much and tax wealth more though. Inevitable. I think that, more so than the optimum level of income tax for very high earners, is going to be the most important tax policy discussion within a decade or two.

YANBU at all

Exactly what user1497 said.
Once people are robbed of the fruit of their labour, they stop putting effort in (this is valid for all levels of income, not just the rich).
It’s why communism never works.

So, now we’ve established you do not and it is mathematically impossible to actually pay “half” your earnings in tax, I do agree that the U.K. Labour Party is way too communist for my liking. I’m admittedly pretty biased being American. So while I do agree rich/high earners should pay more income taxes, I don’t agree with punitive levels of tax. I also don’t agree with the number of tax avoidance schemes only available to the rich....Trump once bragged he paid less tax than his secretary. I think everyone should pay a fair share. Lower income should pay less in tax because a certain income is needed just to survive with dignity. Once you’re raking in millions, that extra above subsistence is fun money and should be taxed at a higher rate.

*I'm British and was bought up on the breadline, went to state school, have a disability

So would it be fair to say that you benefited directly from the welfare state in your childhood?*

Not in the slightest, we received zero benefits whilst I was growing up - always lived in private rentals as we fell between the gaps.
It's a bit of a different argument if you could state schools as a benefit, but the tax that I paid working for 12 years in the UK covers it (and I've actually done the maths, it does)

In fact no matter how much your earnings could be, you’d never pay out a full half term mathematically impossible.

I'm obviously not going to disclose the full details of my finances, but an _oversimplified explanation is that my earnings, as the business is not UK based, were to be taxed on turnover, not on profits.

Having said that, if the business was UK based - i'd be paying corporation tax (20%), VAT on sales (20%) among other things. And I wouldn't benefit from being VAT registered as there would be very little to claim back VAT from - and the vast majority of buyers are overseas, but all of my sales would be taxed at 20%.

It's a business run only by me, not some huge corporation - so the profit = my earnings. But various different business and income taxes come into place taking great big bites of it.

(By the way, congrats on your astronomical business growth from zero. It's so impressive it's almost like it's fictional.)

Tory Central Office seems to be busy today.

They’d probably get more of mumsnet onside if they properly funded education, healthcare (including mental health) and support for people with special needs.

Go on, OP, tell us all how little tax you want to pay. What would be an agreeable level? And what services are actually funded by taxation in your foreign idyll?

Not in the slightest, we received zero benefits whilst I was growing up - always lived in private rentals as we fell between the gaps

Child benefit? NHS?

@katalavenete
You pay tax on profits not turnover, i.e. After deducting all your costs.

If the OP was talking about her business income when she said “my earnings” regarding the taxes, it would only be 19% of her profits due in U.K. tax. U.K. has a very low corporate tax rate. There is no way in hell it would be “half.”

Cheerio!

No sympathy here. I'm no Corbyn fan, but one thing I do like about him is that he's prepared to raise taxes for the very wealthy - who CAN afford it.

If you're real by the way then you have pretty shit morals to think it's fine to move to a country where disabled people are left to suffer and die because nobody takes collective responsibility for their community through taxes just because of your own greed. So not only were you happy to shirk your responsibilities to your own community, for your own gain you went and drained another community without contributing to it.

Either we pay taxes and have public services and properly care for everyone in our society, or we decide the cushy lifestyle of a few is more important than human life and community. You chose the latter.

I wouldn't boast about it if I were you.

You arent paying out half of your earnings OP at all... 40% are not yours to begin with. They are tax.

I provide a service, myself and myself only, to customers who pay me money for it.
This is my earnings. Anything after that is a deduction from my earnings.

And you would like us to believe you're not well off and could never have afforded a £500k house?

Did you read my post?!

I agree with you OP. There’s only so far you can tax the rich before the country ends up bringing in LESS in tax. According to a study by a professor at the LSE, the optimum higher tax rate is 37% - go higher than that and the rich start to leave.

And exactly how much of the burden should the rich bear? People are absolutely vitriolic about the rich but they tend to be very hard workers who hand over huge amounts of their earnings in tax to support the welfare system. There seems to be very little appreciation of that on here.

Lower earners pay a high proportion of their income in tax

@pointythings

How?

And I wouldn't benefit from being VAT registered as there would be very little to claim back VAT from - and the vast majority of buyers are overseas, but all of my sales would be taxed at 20%.

VAT is a sales tax that the buyer pays you via higher prices and you simply collect it on behalf of the government. It’s not you that is paying the tax. In addition as a company, you can claw back any VAT you pay to suppliers to your business.

Having said that, I am not too keen on people becoming tax exiles. I don’t think the current tax system is unduly burdensome. But I would be worried by what a Corbyn government might do.