Only the employed seem to pay tax?

[Taxevasion]

This is annoying me. Met a person recently that owns a lot of property (multi-million) that is let out in various ways but doesn’t pay any tax. Whatever they do is legal but the fact is they don’t pay tax so don’t contribute to the costs of running the country.

So am I being unreasonable in thinking this is very unfair? It seems that only those of us who are employed and pay tax paye fully contribute.

@Cheerychirpy

It’s not too wide of the mark. The UK tax system is focussed on taxing earnings as opposed to wealth. It’s easier to administer for HMRC and harder to avoid. It’s wrong though. When people can sell a house they’ve lived in for 30 years and walk away with 90% of the sale price in unearned profits something is very wrong with our tax system.

I fail to see anything wrong here. I assume your talking about a persons home. If you taxed profits in their principle private residence (which is actually a limited relief esp where properties with large grounds are involved) then people would be much less likely to move as they would lose money for no reason to the tax man which is usually only a profit because of property inflation and therefore they couldn’t buy their next home! You would essentially kill the property market

If you want to tax people based on wealth you end up with lots of people who are property rich/cash poor unable to pay and getting into debt.

So you’ve met one person who you claim doesn’t pay any tax he will . It’s virtually impossible to not pay tax . Tax and death are certainty’s of life op don’t believe everything your told .

I agree that their are more options for tax avoidance when we're talking about tens of millions.

@Flapjacker48

Its remarkable the number of people who are self employed who pay themselves a salary £12,570 (i.e no tax to pay) and the rest in dividends.

More like 9K. Above that level you would have to pay some NI.

You've just got to look at the major multinational companies to know that taxation isn't fair. Workers have no way to avoid tax. They can't tax plan their way out of it as deductions against wages are very limited. Multinationals pay a fraction of their true obligations due to tax planning. High wealth individuals are the same. I was a tax accountant for quite some time (not UK) and there are so many loopholes to get out of paying tax if you have non wage income. Wages, there's no hope and limited deductions available.

But in the USA, property tax is akin to council tax, and local government funds education rather than central government. So your property's value relates to the contribution you personally pay directly towards your child's education. If you own a lovely detached house on a big plot, you will be paying a lot more to the education system, because you can, than a single parent living on the 11th floor of a tower block --- which seems fair.

@sst1234

You’re not wrong OP, PAYE people seem to spy more than most. Big business may not pay a lot of corporation tax but pays a fair whack in employers NI and other employee related taxes as well as VAT. Consumer pay VAT too. The biggest problem is with some traders and small businesses, they are pulling every dodgy trick in the book.

Yeah! I pay for every piece of paper, every stamp, envelope, phone bill, all equipment, transport, every cost involved with my business. Something no employee does.

That I can deduct these costs from my tax bill doesn't mean I haven't had to pay them up front first. I pay 100% of them and get up to 20% of it back via a reduced tax bill. Just like your employer does!

The automatic assumptions made about small business, sole traders is rooted in what? Ignorance? Jealousy based in a misunderstanding about expenses and taxation?

@Taxevasion

They were complaining about an undesired outcome of not paying tax.

I'm wondering what the undesirable outcome is, especially as it's easily solved.

I don't understand how it works when people pay themselves in dividends, how it's calculated etc. If anyone knows of any easy explainers, I'd like to learn.

@Flapjacker48

Its remarkable the number of people who are self employed who pay themselves a salary £12,570 (i.e no tax to pay) and the rest in dividends.

I have no idea what I am then. A unicorn?

Of course they pay tax.

All self employed or companies pay tax

@RandomLondoner And wasn't there sure bleating from such self-employed people that any support from the government during covid was based on such salaries!

I’m not going to say what it was @DaisyNGO

@Flapjacker48

You only get 5000 in dividends free of tax so you are totally incorrect .

If they receive rental profits then will pay tax. When they sell property and realise a gain they will pay tax. If they've put the properties in a company the company pays tax on its income and gains. When they pay money to themselves out of the company they will pay tax.

Get so fed up with the assumption the wealthy don't pay tax. We pay tons. High rate. Property. Then at the end inheritance. Not complaining about the tax, complaiming about the assumption. Plenty of cleaners, builders etc take cash in hand and don't pay a single penny. Plenty of people work cash in hand and claim benefits. Tax avoidance/ evasion is not just something some wealthy people do. ,

@Oblomov21

Loads and loads of my SE friends don't pay hardly any tax and I know because we discuss their tax returns because try know I do tax returns for other people.

Absolutely. Self employment in my industry (software) is blatantly a tax avoidance practice which ir35 rightfully seems to be clamping down on. The residential BTL when held in a company structure is again ripe for tax avoidance.

@sst1234

You are incorrect as well . And do you realise small businesses combined are some of the biggest employers in the country .

Not sure why they bother though really , what with pensions national insurance and corporation tax . Plus ungrateful employees .

This is such nonsense and it’s concerning that you just believe it.

[quote Unsure33]@Flapjacker48

You only get 5000 in dividends free of tax so you are totally incorrect .[/quote]
£2000 not £5000

@TheFrendo - that’s not a way to avoid uk tax. Even if the profit is made offshore, any income or gain made by someone tax resident in the uk is chargeable to uk tax regardless of where it is made.

As many have said, it’s nonsense. If he has income from uk property he will pay income tax. There is no easy way to avoid tax, it’s just a myth.

Many employees have income tax and national insurance deducted at source. When the interest on my mortgage was over 10%, it took almost my entire take home salary to meet the mortgage payment. The taxman didn't give a damn about the train fare or other costs required to earn my salary.
Limited companies pay tax on their profits, the money left after meeting the necessary costs of generating their income, no profit, no tax. The necessary costs incurred by some businesses look a lot like the expenditure for your cost of living.
Plenty of people pay no income tax, some of them legitimately. Over the long-term, the tax evader has to be lucky every tax return, HMRC only once. My tax bill is painful, but I have no problems sleeping.

@Mouseonmychair - how do you avoid tax by holding property in a limited company? Corporation tax is payable as is income tax on dividends and salary.

@Taxevasion

This is annoying me. Met a person recently that owns a lot of property (multi-million) that is let out in various ways but doesn’t pay any tax. Whatever they do is legal but the fact is they don’t pay tax so don’t contribute to the costs of running the country.

So am I being unreasonable in thinking this is very unfair? It seems that only those of us who are employed and pay tax paye fully contribute.

OP, I am afraid your first post riled me too much for me to RTFT (sorry). I am not employed, and property is my sole income. I certainly pay my sodding taxes and contribute fully! I think the problem is with people who find legal ways not to pay tax, not with people whose income is derived from property. If it's any consolation, I have a friend who (legally) set herself up as a sole trader in order to pay herself a dividend and (legally) pay as little tax as possible. She was completely fucked during lockdown, as she apparently earned nothing. By the way, property was my salvation after I left my husband who abused our children. So I would definitely not make generalisations about people who own property.

Self employed here and pay tax

The very richest pay the least. (Fair play to Elon Musk though - with his recent share selling to pay tax, and offer to the UN).

The rich take advantage of legal avoidance schemes. Avoidance is not evasion. Morally right? Perhaps not. Legal, yes.

But, no, it's not only the employed who pay tax. Everybody pays some tax - including those out of work, those too disabled to work, and those on basic state pension. VAT, for example.