Where do people think money comes from?

[MrsBlobbyOnLockdown]

Everyday we are hearing pay the NHS an extra 30% pay them £26 per day extra is the latest one.

I’m not disputing they deserve it of course they do & if we had an endless supply of money it’s the first place it should go.

But seriously, where do people think all this money is coming from?

What are your thoughts

@Xenia - there are still many reasons to incorporate legitimate business. IR35 is aimed at disguised self employment - many people have been using companies for years for blatant tax evasion (including things like paying their spouse who is not working in the business to take advantage of their nil rate band which is illegal tax evasion). If it doesn’t benefit you though, don’t do it.

Given all your claims to own private islands I’m not sure why you feel you need a handout from the taxpayer anyway? I doubt it’s anything personal from Rishi.

Teresa May didn’t introduce austerity. Cameron and Osborne did. Please read a bit of economic history!

@BubblesBuddy can you recommend a not too weighty tome on this

The banks did suffer. But people really suffer if they cannot access money. Business too. It’s vital to have access to money. That’s why the government supported the banks. It was the only thing to do. What happened next was a political decision. We didn’t have to make such severe cuts and a lot of that was IDS being let loose on the welfare state and not taking enough notice of where money was spent and how effective it was.

@Sunnypeople -you are either being deliberately disingenuous or you just don’t understand the issues.

If you are paying yourself via dividends rather than salary you are setting up your income deliberately to avoid tax (as I said mainly because you don’t have to pay NICs for employees or employers which is 12 and 13% respectively). I don’t have an issue and I’m not the one calling people “idiots”. I’m just correcting the misinformation you put out there in an aggressive and rude manner.

I never said that paying yourself through dividends avoids all tax, but you pay less tax than you would have done if you'd paid yourself the same amount through PAYE. That's why people do it in the first place.

And posting lists of tax paid on dividends doesn’t add to the debate, just shows you don’t understand it

You are now being ridiculous Cayrol. Show me where I posted a list of tax rates? I'll save you the time - I didn't.
And in one post you tell me it isn't the same money and then you say it is irrelevant that it's the same money.
Seems to me that you are the one that doesn't understand.
And for the record, as I stated in an earlier post I am also an employee paying PAYE so have no skin in the game but it pisses me off that people, like you, who don't understand it have very vocal opinions that you pass off as fact.

I thought that everyone knew you got taxed on the full amount of overtime pay as there's no personal allowance due to you already using it for your regular wage. I guess some people don't work overtime very often.

In any case any government employee such as someone working in the NHS wants to be pleased about government admin - it's that which puts their payroll through!

And just to pick up on your reply to Sunny
I am talking about sole traders here, you have now jumped to big companies - who would still have to pay NICs for their employees - just not maybe themselves.

@cayrolBaaaskin

If you are structuring your affairs in such a way to avoid tax, can you really complain if you are entitled to less government support as a result?

I operate like this. I've been doing it for a year so don't have too much of a warchest built up - but I am not asking for a handout.

What I would like, however, in return for no handout, is for the government (mostly HMRC) to fuck off to the far side of fuck telling lies about what I am doing and trying to make out that I am a "disguised employee" with bad legislation like IR35 which is highly complex and expensive to test.

Also, the government appears to feel it's fair to offer help to those operating through what it has called PSCs - but only for those contracting in the public sector, which is odd.

If you are structuring your affairs in such a way to avoid tax, can you really complain if you are entitled to less government support as a result?

BTW the main reason I did this after 40 years of paying PAYE and NI was that it was the only way I could find any work and companies demanded I operate via a LTD. I'm not denying it avoids NI, but that wasn't the sole motivation and my one-person company has other costs such as accountancy and insurance.

Just wait till you see the cost of trying to burn through all the waiting lists so the hospital doesn't get fined. Clamp down on tax evasion and avoidance. Reductions in CEO pay if their staff are having to claim universal credit and go to food banks because of poor pay. How can a capitalist economy function if people can't earn a decent wage.

@hingeandbracket - well aware there are lots of good reasons why people would structure their business as a private limited company. But one benefit is that you can choose (as a sole shareholder) to take income via dividends rather than salary. This means you pay less tax (including corporation tax paid by company ) overall.

You don’t have to do this - you could pay yourself entirely in salary and pay the extra tax. I entirely understand why you don’t but can you then complain if this choice to pay less tax leads to less benefits.

@TheWordWomanIsTaken - you’re being awful aggressive and paranoid. No one said you posted tax rates. You seem to be awful focused on attacking me, for who knows what reason. But if you understood the issue you would know I’m right that overall less tax is paid by taking dividends even once corporation tax is counted. That’s just fact.

If there is poor tax intake councils get less funding. By extension council services struggle and the vulnerable suffer. Maintaining of roads, buildings. Putting infrastructure in place doesn't happen. What do people expect from services of they're not being funded the way they need.

Back from the Brink by Alistair Darling gives a reasonable insight into the financial crisis. Andrew Marr’s The History of Modern Britain covers austerity in the latest edition. The rest of the book gives a great background to our history from ww2. The book written by David Cameron is also worth looking at and also the analysis of austerity by Polly Toynbee - The Lost Decade.

Cayrol huh? you are the one being aggressive. Actually you've been damn rude tbh.
And it was you that said I posted tax rates. In your post at 11.11am

@TheWordWomanIsTaken - not relevant if it’s the same money or not. A great many of us who are employed work for businesses that pay corporation tax. We don’t get to include that as part of our tax paid. Because it’s not
As for the “difference being negligible” it depends on the circumstances but people are setting up their remuneration like this to avoid tax. Doesn’t really matter how much they have avoided. In my view they can’t complain if their actions to deliberately pay less tax leads to them getting less benefits from the government. Seems entirely reasonable to me
And posting lists of tax paid on dividends doesn’t add to the debate, just shows you don’t understand it

No one said it wasn't a fact that there was less tax paid overall. I said the difference was negligible in the current tax regime.

'kin hell, you need to grab a cuppa and calm the fuck down.

Companies are always forced to cut costs due to what the public will pay for their goods or services. In a high earning economy (and we are) we are trying to compete on a global stage. We, as a nation, buy cheap imports. It’s very difficult to compete with that. Just look at the success of Primark. Why do you think M&S quality has declined? They cannot sell better made clothes made from better quality fabrics. We, as a nation, have prioritised quantity over quality. If firms didn’t adjust ALL our purchase would be from abroad. As a I said earlier, please buy a Range Rover if you can afford one but never think we can compete in a global market for ordinary priced goods. Look at the clothes in your wardrobe, your car, your food. Are they sourced from here? Then look at goods made here by British owned manufacturers and compare prices. Would we even be able to make enough to satisfy demand?

The amount of tax difference is not negligible! It all adds up!!

The amount of people who say "we should produce everything in Britain!" and "everyone needs living wage!" but aren't prepared to pay more than £10 for an item of clothing! Do people have any idea how much stuff would cost if we manufactured here and paid fair wages?? The only reason food is so cheap is foreign workers and massive subsidies from government.

We could pay less to some other people. MPs come to mind.

And the worst thing is, when people pay more for clothing at "nice" brands, they assume that higher cost means better wages and working conditions. Like hell. All that stuff is made in the same sweatshops as Primark stuff, you're just paying extra margin.

There is an infinite amount of (government backed) money. The money you think is real is a massive ponzi scheme, and one thats coming to the end of the road. Which is why people are becoming more interested in Bitcoin, which has a fixed supply and predetermined inflation.

Since money doesn't relate to gold anymore I just can't understand why we don't just print the money for what we want?!

Actually there is a school of thought that we can just print more money, it's called Modern Monetary Theory. If you google it there are some good explanations and youtube videos.

I spent some time reading up on it a few weeks ago, it took me a while to realise their acronym MMT could also stand for Magic Money Tree. In one presentation they literally said that there is in fact a Magic Money Tree that could be used to pay for more spending, in the USA where most of them are based.

I think there may be something in what they say, but in reality what it boils down to is that maybe the USA and UK deficits are not as big an issue as we think they are. I doubt it makes a huge difference to how much we could spend, but it might mean the post-2008 austerity was harsher than it needed to be. (I say that as a right-winger who would always prioritise sound money above government spending increases.)

While MMT is interesting, particularly where it describes in detail how money is created, I think it's far-fetched to conclude that politicians in multiple countries over many decades have spent less than they could have, because they haven't understood how money works.

Apparently MMT drives mainstream economists nuts. Even those who agree that the US deficit is not a problem don't like MMT. I don't know enough economics to understand their objections.

The amount of tax difference is not negligible! It all adds up!!
Yes, of course it all adds up.
But it is pretty negligible compared to the avoidance around transfer pricing by big companies who register in tax friendly jurisdictions.
I would much rather be PAYE than a sole director even if it means paying more tax.
And lots of sole company directors are forced down that route by companies who make them redundant and then 'employ' them as consultants or whatever so that the company is now not taking the burden of employer NICs or staff benefits such as sick or leave or maternity/paternity pay.
All pretty dodgy all round tbh.
So to focus the ire on sole company directors is pretty myopic.

It's not true, as a previous poster said, that all banks can do this. They can't. Lloyds can only lend what they have themselves available to give. They can't create new currency. But a central bank, controlled by a government, can. The Federal Reserve, or the Bank of England.

Unless you are using "currency" in a very narrow technical way, that excludes all the stuff we have in our bank accounts, then it is wrong to say banks don't create money. There is a technical sense in which bank money is not "currency", but we are not talking about currency in this thread, we are talking about money. Other posters have already alluded to the fact that 97% of money in existence is created out of thin are by commerical banks, and that information comes from a paper that was published on the Bank of England web site in 2013. (I assume it's still there for anyone who wants to look, it is fascinating.)

Regarding in particular:-

Lloyds can only lend what they have themselves available to give.

The Bank of England paper is quite emphatic that commercial banks do not lend out money they already have, they create new money out of thin air every time they make a loan.

To ensure the integrity of the banking system, banks do have to balance their books, and a major way of achieving that is having deposits that cover their liabilities. But the liabilities come first, they scramble around for deposits after the fact. They don't first get the deposits then lend them.