Tax system

[Cupcakes2024]

Watching some of Jamie dimon from JP Morgan and chase bank, speech's and one point he advocated is rather than tax the rich to raise taxes is instead its better to have a balanced tax system , basically is Jamie correct ?

Good point about NI being applied separately to each separate pension @Badbadbunny . Taxation is devolved though, while NI isn’t. So if they scrapped NI this would apply to the whole of the UK I believe, whereas the increase in tax rate to make up for it would only apply in the jurisdiction that implemented the change.

A single person limited company isn't a "fairly narrow" situation at all. The vast majority of limited companies are tiny one man companies (or husband/wife). Numbers increased massively, in fact, exponentially in the early noughties when Brown brought in tax incentives for the smallest of limited companies causing the stampede of incorporations by window cleaners, plumbers, joiners, small shops, etc etc. Those incentives are now long gone and "anti avoidance" measures introduced, that remove most of the tax benefits. The fact is that for a one man mechanic limited company, the corporation tax paid on profits PLUS personal tax on dividends, equates to virtually the same as the tax/nic they'd have paid as a sole trader on similar profits.

Nothing to stop a devolved nation changing their income tax rates like Scotland already has.

And anyway, the different tax rates are only for earned income (wages). The same rates and allowances apply in devolved nations for unearned income such as interest and dividends.

One thing must be that setting up a Ltd co is a risk but if you can grow it even a little to 10 employees you’ve used that motivation to add jobs

I don’t know as much detail as @Badbadbunny but I do know it’s taxed enough already, and growing new companies is a good thing for the economy

@Badbadbunny what I was meaning was if in England we scrap NI and raise the basic rate to 25% to make up the shortfall, then don’t we lose the NI revenue from the other jurisdictions? Is NI collected and used centrally? I’m not sure, I just remember that when the health and social care levy was introduced (via an increase in NI rate), it was said that it was done via NI rather than tax because Westminster doesn’t have any control over tax rates in the jurisdictions but can change NI nationally.

The fact is that for a one man mechanic limited company, the corporation tax paid on profits PLUS personal tax on dividends, equates to virtually the same as the tax/nic they'd have paid as a sole trader on similar profits. For the individual, perhaps (although see my earlier posts on NI) but where the taxman loses out in this scenario is in employers NI, which is why they have been doing stuff like the IR35 changes.

in the same way someone can have 2 part time jobs each earning £25k and not pay any NIC whereas someone with 1 job earning £25k pays around £1.5k in tax.
If the 2 jobs are with the same employer eg NHS they may be subject to aggregation.

@Badbadbunny out of interest, would you also expect the pension fund to pay the equivalent of ’employer’ NI. I imagine this could be challenging for a lot of pension funds.

I would personally be in favour of merging the systems if pension entitlement could be sorted out.

Covid cost the country between £300-400 billion and the Ukraine War has cost another £100 billion including military aid, the energy and food cost increases etc

The current tax system just doesn’t work properly.

An example is a person who earns £100k a year.

They can comfortably live off £50k.

Instead of paying £20k tax and £1k NI on the £50k, they avoid it by sacrificing salary down to £50k. The excess goes into their pension. When they take their pension, they are basic rate tax payers, get 25% tax free and only pay 20% on the balance, possibly even less if they have no other income when they retire.

Not only that, their company saves 13% national insurance too so that is also often paid into the pension too. That is another £6500 not going to the tax man.

Eventually that person might pay 15% effective tax so the tax man eventually gets £15k but that could be 20 years later.

It means they often make more money off someone earning £60 odd thousand than they do off someone earning £100k

The tax system is easily exploited by those who know how to work it.

@Shortyp

The tax system is easily exploited by those who know how to work it.

That's not exploitation. The tax laws specifically allow, in fact they incentivise, people to do exactly as you say, i.e. salary sacrifice into pensions. There are specific incentives to do just that. It's not a loophole and not exploitation. It's what politicians want you to do! Successive political parties over the past 20/30/40 years have introduced laws to encourage/incentive doing that!!

The wealthiest are the ultra rich who have all been getting wealthier whilst the rest of us are getting poorer. The person earning £50 or £100k even are not the people would be targeting. They have been getting poorer over the last decade like the rest of us. It's the ultra rich that are the problem. They are getting rich off the backs of EVERYONE else because they have all the assets. That's what we need to be working on. We need to correct this massive and growing inequality.

And Jamie can fuck right off with more taxes for the poor to make it "fairer".WTF!

@Badbadbunny

But have been too afraid to reverse any of it when the need has arisen. It is stacked in favour of those who are more likely to be high earners/higher rate tax payers. I am not sure how giving away lots of tax relief helps the tax revenues of the country. I’d be happy to hear an explanation though.

That's fine if you're just concentrating on politics of envy and wanting to punish the super rich.

But in reality, even if you sent all the super rich a tax bill every year of a few million, it wouldn't even begin to solve our problems because there are relatively few of them.

Do the maths. It's a numbers game. To really bring in significantly more tax revenue, we need to be taxing everyone more, i.e. 40 million workers and pensioners. Hitting a few hundred people for a few million each works out less income!!

Definitely time to get rid of NI and just increase income tax to make up for it. It makes absolutely no sense that pensioners don't pay it.

Is it just me who "politics of envy" as "don't get ideas above your station, serfs"?

Political suicide for any party though.....

I think people need to look at numbers and how much it would bring in

short term losses for long term gains is the general theory

If income inequality can be brought down, then people will be happier to pay more / different taxes. I fear it will take at least a generation though and probably more before opportunity is more equal.

One thing people forget is that net contributors are outnumbered by recipients now. So, the natural and democratic course of taxation policy will be to ask more of contributors.

The main one I’d close (although not a loophole but just part of the rules) is that capital gains tax should be payable on any uk gains regardless of residency. At the minute you can sell a uk business for a gain that would potentially have millions due to capital gains tax and move abroad for 10 years and not have to pay any capital gains tax. It encourages people to move out of the country and it’s much easier to move to other countries when you have £s. Any gain on a uk asset should be subject to uk tax

That’s always been the case ever since the concept of taxation was born.

The problem is that as @HFJ has said the recipients are outnumbering the contributors. The people in the middle have nothing more to give, the gap between working and benefits is too small.

Generally we see the government tinkering with the amounts in the graph up thread - 2p in a bottle of wine type stuff. Given the state we are in this cannot continue, some big decisions need to be made. Taxing the mega rich a bit more won't help in the long term, these people have options available.

To raise more money over the long term it needs to catch a large group and it needs to be accessible/easy to collect. The obvious one is CGT on main residence however this will affect mainly those main contributors who have been pretty much bled dry and I do wonder what would happen to the housing market if they did this. The second I think is council tax, rebranding etc.

I feel one things for sure, if any government continues to try to take more from the middle band, further eroding the benefits of studying and working hard then we will see more young people simply refusing to engage. The birth rate will fall further and there will be fewer contributors. This will be bad for everyone.

Ask those company directors how much furlough money they received during covid and then tell me again there is no reason to make NICs.