High earner leaving UK because of tax

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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?

Ok op, sorry it just sounded like you were operating in the U.K. and charging VAT already. So you have no U.K. suppliers and customers at all?

Or are you operating in U.K. without charging VAT to U.K. customers? I thought all foreign companies in U.K. that sell VAT taxable items have to do a non-resident VAT registration and there is no threshold?

If you provide a service from a UK based company to a company outside of the EU, you do not have to collect VAT. Even if you did, VAT is not "your money" - you are simply collecting it on behalf of HMRC. And if your customer is a business, then they don't care, as they simply claim it back. The fact you're including it in your "calculations" is a big red flag.

Corporation tax is 19% on profits only - so that's after all expenses including staff wages are deducted. You can also deduct things like life insurance policies and very importantly, pension contributions (which are totally tax free until retirement, up to £40k per year).

As you own the business, you'll pay yourself £8400 per annum in PAYE (wages) as that'll keep you under the threshold. The rest will be withdrawn from the company as dividends, so you'll benefit from a lower rate than normal employees.

You need to talk to an accountant, or maybe do some reading yourself before creating a post like this, because you sound a little ignorant.

My dh is the director of a VAT registered limited company and I have quite a good professional London job. We together earn combined salaries of just over £100k. We do very well even while paying taxes as we should and will have no problem buying a house in to £700k range. You can have a very good comfortable life on that sort of income in the UK. If you’re struggling, it’s because you haven’t done enough financial planning and aren’t living within your means.

I have a family member who thinks this way too though (one by marriage, I didn’t grow up with money). Constantly crying about how hard it is to make £250k per year and panics when his current account balance dips below £200k. It’s all about perspective. Sometimes you lose it when you have it too easy.

I knew that this would get a beating, but can those calling me selfish, greedy, with no morals actually put their hands on their hearts and say that you would be happy with paying out level of money that you've directly earned yourself?
Oh, me! Me! I can answer this!
Myself and DH both run our own businesses. We both grew up in deprived areas with parents with health problems. We're not going to leave the country because of any tax changes. Why? Because we benefited from everything this country has to offer: healthcare, education, etc. Of course we should pay back.
DH's politics have always been to the right ie voted for the Conservatives. But he actually believes in small businesses and paying back. It's not a view that Labour has a monopoly on. maybe feed that back to your focus group

Just a thought, you say in the area you want to live a houses starts at about £500,000? Well would it not be viable to move to an area of the UK where the houses are cheaper? If you’re prepared to go to another country, surely another part of the UK wouldn’t be too much of an upheaval.

I guess you got lucky with your business and your story is the rags to riches but that’s the exception rather than the norm unfortunately. Most people on the lower income scale work as hard as those on the higher income scale (and in shittier conditions/shifts etc) but for various reasons haven’t been able to get a job with better wages.

I personally can’t stand Corbyn but I do like the fact that labour generally look out for those less fortunate. I would rather see someone complain they can’t have that 4th holiday than can’t afford to feed their family.

Perhaps we do tax the rich more than they’d like but that’s the same for everyone. No one enjoys paying tax, whether that be £300 or £40,000 but it’s relative to life they’ve become accustomed.

its not just going abroad either . small businesses are huge employers and if you penalise their hard working owners they just wont bother with al the stress.

I don't entirely agree with the OP - but our tax system does need an overhaul and simplification I think .

I don't blame anybody for moaning about taxation

I don’t have a problem with taxation and personally think we need a politician prepared to tell some homes truths about how much we need to spend to get the levels of service we expect instead of the current shifty spineless lot we have now who dance around the issue pitting everyone against each other.

OP you seem a little confused about what tax you would have been paying if UK based. I find it strange that you decided to uproot yourself to a different country on the basis of tax when you seem a little confused about what tax you would have been paying if resident in the UK. I would be seeking different accounting advice if I were you. DP has his own business with 2 others, a private ltd company, and we find it to be more tax efficient than PAYE. Although he probably still earns proportionally less than when he was employed due to the number of hours he needs to put into his relatively new business at the moment.

If people would stop thinking of taxation as a penalty but rather as a contribution we might have a better discourse about it.

I think Corbyn just hates rich people - end of - it does not matter if they have worked hard , given employment to others and improved their lives - sorry I am an ex labour voter but I genuinely think that's how he feels .

to him being well off is a crime .

I agree about the comment about tax being a contribution which is why I would not necessarily vote for low taxes - or high taxes - they just need to be fair.

“I think Corbyn just hates rich people“

Fair enough. Then Boris Johnson hates poor people.

YANBU OP and congratulations on creating such a successful business.

It's obvious that high earners will leave if the tax rate goes up a lot, or if they stay, their money will leave. The tax rate was 90% at one point in the 1970s and there was a mass exodus of the rich. Who could blame them?

Labour and their supporters won't be happy until we are all living in some Marxist dreamland where no-one will aspire to anything because it will be taken away as soon as they get it and given to someone who has done fuck all for themselves.

People who think Corbyn is right need to read about what happened under Labour in the 1970s

Jeremy Corbyn was there in the 1970s

He does appear to want to create the 1970s again.

Dp is a higher rate tax payer and with his NI he pays 50% of his salary in tax.

@Limitedsimba123 I'm not confused, I really appreciate the advice though.
It comes across as messy as I was trying to keep things as simple as possible - my point wasn't to get into a big conversation about my personal taxes as I wanted the point to be on the "tax the rich" theory clearly didn't work though.

Rest assured, my tax affairs are in hand.

A lot of thing are not right on this thread. People on dividends need to remember the recent changes to dividends rules which mean for many there is not much difference now between taking money from your comany as dividends and paying 45% (47% once NI Is added) or 40% tax as a sole trader.

if Corbyn gets in I will make sure I pay less tax within the law.

The bottom line is that many sole traders and people with their own limited comapny in the UK now pay almost half their income to the state in direct taxes even before we get started on stamp duty. We have become a high tax country without the advantages like free nurseries for babies some other high tax countries have.

Corbyn is also likely to charge me £30k a year (the small London homes supposed mansion tax) which he has gone very silent about recently for obvious reasons.

Boris needs to spend now because the Tories had to clear up Labour's high spending mess (as usual) and had to reduce spending for years.

Did the global financial crisis completely pass you by?

@smeerf
Thank you for very informative post about various deductions the OP has access to. Just further highlights the fact that a lot of the business profits can be funnelled into tax shelters and not counted as her personal income for tax purposes. I bet if she used just the ones you listed her effective tax rate would go as low as the 20% of the basic tax bracket for lower earners.

Boris needs to spend now because the Tories had to clear up Labour's high spending mess (as usual) and had to reduce spending for years

No he didn't. The Tories' austerity program was always ideologically driven.

www-cdn.oxfam.org/s3fs-public/file_attachments/cs-true-cost-austerity-inequality-uk-120913-en_0.pdf

www.independent.co.uk/news/uk/home-news/un-poverty-austerity-uk-universal-credit-report-philip-alston-a8924576.html

“Dp is a higher rate tax payer and with his NI he pays 50% of his salary in tax.”

Rubbish. Even if he doesn’t get a personal allowance he pays a proportion of salary at 20%, his NI will be 12.8% until he reaches the higher rate band and then it drops to 2%.
So even at £150k plus he will pay a maximum of 47% (45% tax, 2% NI) but only on earnings OVER £150k.

“Dp is a higher rate tax payer and with his NI he pays 50% of his salary in tax.“
He’ll still have quite a bit left over- unlike the bottom 10%- who pay 42%...

You still haven't said which country you live in, which requires you to pay no tax whilst allowing the residence to live in a utopian dream?

Super confused how you couldn't have afforded a 500k

We have private med care and private school for the kiddo but aren't kidding ourselves about it. We still use the NHS is part (GP usually first port of call before referall) and many - though not ours I believe - private schools get massive tax breaks which means we're not removing burden from the main system at all.

That's if we even forget that our earnings are a direct product from the primary and secondary schools, subsidised universities, NHS keeping us healthy, etc, etc etc.

To be honest I'm just hearing the rant of a selfish person who couldn't wait a few more years to save than the rest of us. I know couples with incomes of >£90k combined living in £500k houses. DH is in the highest tax bracket but because he's an employee we don't see the money...maybe that's why we don't feel entitled to cheat the system!?

I am proud to live in a country where we try to support those more vulnerable and provide safety nets for ourselves in case we one day are those people and dread the day we lose the NHS and similar services because people like you are too greedy to contribute.

I agree with you. Yes, people should all pay tax. Increasing the tax rate so some people end up paying nearly 50% tax is outrageous.
It only penalised the ones stuck in the middle anyway.

Higher salaries don't go on PAYE, and go through all possible legal schemes to reduce that ridiculous amount. It's very naive to say that high earners are happy to contribute - no, they are not, or they wouldn't accept a pay package, they would stick to a taxable salary.

it is also true that people avoid the UK tax system as much as possible when it benefits them, and why shouldn't they?

If you change everybody's tax rate to 40 or 45%, people will react. When it's someone else, who is "rich" because they earn more, they are happy.
It's outrageous.