Balance: Jeremy Corbyn's tax return

chrispy108

Corporation tax is imposed on profits - cash, so that cash can be used to pay the tax.

Fancy reading your article? Even the bit I quoted and highlighted?

Axe_meister

Nothing has any value until it is sold. That is the main issue.

I by a house for X amount and pay Y amount per month.

I earn (after tax) Z amount. Now lets say the perceived value of the house goes up by 10% and tax on it is 1%

So the value of the house is now worth 1.1X. so I pay 0.01% on  0.1X so = 0.001X

Lets put some figures on that. lets Say X is £1m So the tax I have to pay at 1% will be £1000.

Now what money do I use to pay for that £1000.

My income is Z my mortgage payments are Y. So what I have left over (B) = Z-Y

Then you have the rest of your normal outgoings, lets call them C. 

So money I have left to spend is Z-Y-C

the problem comes when Z-Y-C < £1000.

OK probably not so much of a problem.

But lets say this is company owner who pays himself 100K a year. The company is work £50m and grows by 10%.

Now my tax bill is £50,000 on top of the income tax already paid on. That is an additional 50% of his income before tax.

He would have already paid £30K in income tax. So out of the 100K he paid himself he will have 20K left over.

The problem is he may well have outgoings that exceed 20K, e.g. mortgage/car/kids, etc.

Sounds fucked to me.

quarky

Sure. To copy from above:

"I don't think the rich keep a huge, large, or even substantial amount of their wealth tied up in the value of their home."

To add to that, I don't think they don't know what there investments and assets are doing either. And not all assets need to provide the flow of income directly.

If I have wealth of £5m, and lets indulge you and say £1m is tied up in my home. Another £2m in long term term investments, and £2m in investments that are more liquid (equities, bonds, funds, etc). If my assets increase by even 5% over a year and I need to find £50k from that to cover the wealth tax. Well, my £2m invested in equities, bonds, and funds will probably return at least double that. If it doesn't, and for some highly unusal reason I managed to get rich by not knowing what I was doing or didn't use IFAs, or aliens came and stole it all, I would still have a approximately £100k from my slightly less liquid assets. Again, double the amount required.

I am sure you can do the sums for similar scenarios.

Snap

quarky said:

So no one ever has problems paying corporation tax? Phew. Glad we got that sorted.

He wouldn't need to sell his house, or to pay 1% of the value of it.

You don't need an expert to value a house.

you are missing a huge point here. When any company earns money, it is through business - practices put in place to earn profit. Whether that is via services, selling, investments, bricks and mortar, irrelevant: the purpose of a company is to make money. So, its is a given that corporation tax will be due on any profit. If you can't pay, that's the director's fault/s. It is a given from the outset.

That is very very different to accumulation of value in a residential property.  Your residence is not, and IMHO should not be seen as something you have to pay capital gains tax on. Again, IMO that is immoral and close to theft.

quarky

Snap said:

quarky said:

So no one ever has problems paying corporation tax? Phew. Glad we got that sorted.

He wouldn't need to sell his house, or to pay 1% of the value of it.

You don't need an expert to value a house.

you are missing a huge point here.

Copy and pasting from above:

"I don't think the rich keep a huge, large, or even substantial amount of their wealth tied up in the value of their home."

ICBM

Snap said:

That is very very different to accumulation of value in a residential property.  Your residence is not, and IMHO should not be seen as something you have to pay capital gains tax on. Again, IMO that is immoral and close to theft.

Why? If you make a vast profit on it it's unearned income. Although I would exempt that if the whole of the proceeds are used to buy another residence, since you have not had the money out as income.

Same with inheritance tax. It's not being taxed twice on the same income, as Cameron recently claimed - it's not the deceased who pays. It's the heirs, who have just been given an asset worth tens or hundreds of thousands of pounds for free and which if they sell it represents an enormous untaxed income. Hence why it *should* be taxed.

But I entirely agree that taxing an asset which is *not* sold or passed on is not right. The increase in value is only notional until it is actually sold.

Fretwired

quarky said:

So no one ever has problems paying corporation tax? Phew. Glad we got that sorted.

He wouldn't need to sell his house, or to pay 1% of the value of it.

You don't need an expert to value a house.

Nobody has ever paid corporation tax. It's paid by company's on profits - the City of London generated £66 billion in tax in 2015. And you'll need an expert to value a house otherwise how will you value it? And you still refuse to answer the basic question of what happens if someone is asset rich but cash poor as in they can't afford to pay. And how much would it raise? Mansion tax has quietly died as it would cost as much to administer as it would raise.

Simple envy.

Fretwired

quarky said:

Sure. To copy from above:

"I don't think the rich keep a huge, large, or even substantial amount of their wealth tied up in the value of their home."

To add to that, I don't think they don't know what there investments and assets are doing either. And not all assets need to provide the flow of income directly.

If I have wealth of £5m, and lets indulge you and say £1m is tied up in my home. Another £2m in long term term investments, and £2m in investments that are more liquid (equities, bonds, funds, etc). If my assets increase by even 5% over a year and I need to find £50k from that to cover the wealth tax. Well, my £2m invested in equities, bonds, and funds will probably return at least double that. If it doesn't, and for some highly unusal reason I managed to get rich by not knowing what I was doing or didn't use IFAs, or aliens came and stole it all, I would still have a approximately £100k from my slightly less liquid assets. Again, double the amount required.

I am sure you can do the sums for similar scenarios.

Investments and funds are already taxed .. from 6 April 2016, the first £5,000 you receive in dividends from investments is tax free. Above this, basic rate taxpayers will pay 7.5% tax on dividends, higher rate taxpayers 32.5%, and additional rate taxpayers 38.1%. 

Non-savings income is normally allocated against your tax bands before savings, dividends and capital gains, so to find out at what rate interest on your savings is taxed, you must add this to your other taxable income.

Higher-rate and additional-rate taxpayers must declare any dividend income on their tax return. If you don't normally complete a tax return and and are a higher-rate taxpayer who receives dividends, you need to let your tax office know.

Do keep up Bond.

quarky

Fretwired said:

Investments and funds are already taxed ..

Not fully. If I have £5m invested, that easily earn £300k/year long term. When compounded that is phenomenal increase. For someone with £100m, it is obviously even higher. And existing tax structures don't impact this significantly.

More people used to recognise this as a problem which is partly why for several decades, due to higher tax rates in the US, UK and other places, the gap between rich and poor shrank, and the middle class developed. Or at least the growth in the gap slowed. Since the 80's that trend has reversed, and the gap is on course to be bigger than ever. Maybe you think that is fine. I don't think it is particularly healthy.

And please don't say simply envy. You have no idea of my motivations. Like probably everyone here, a  larger redistribution of wealth would make me worse off financially because (again like probably everyone here), I am pretty privileged compared to most people in the world.

CabbageCat

quarky said:

Fretwired said:

Investments and funds are already taxed ..

Not fully.

What do you mean by "not fully"? Do you mean that Capital Gains only kicks in after ~£10k profit? Or that people have ~£10k free savings in ISAs? Or do you simply mean that the investment returns aren't "fully" taxed because the tax rate isn't 100%.

quarky

CabbageCat said:

What do you mean by "not fully"? Do you mean that Capital Gains only kicks in after ~£10k profit? Or that people have ~£10k free savings in ISAs? Or do you simply mean that the investment returns aren't "fully" taxed because the tax rate isn't 100%.

Because there ways of ensuring that they don't get taxed through the use of various trusts, and companies. This allows the wealth to keep on increasing and as I wrote above, the gap between rich and poor to continue to rise.

CabbageCat

quarky said:

CabbageCat said:

What do you mean by "not fully"? Do you mean that Capital Gains only kicks in after ~£10k profit? Or that people have ~£10k free savings in ISAs? Or do you simply mean that the investment returns aren't "fully" taxed because the tax rate isn't 100%.

Because there ways of ensuring that they don't get taxed through the use of various trusts, and companies. This allows the wealth to keep on increasing and as I wrote above, the gap between rich and poor to continue to rise.

So it's not the tax method you have a problem with since investments are already taxed, it's just the fact that people are avoiding paying it? If people stopped hiding stuff using "various trusts and companies" would the current system work for you?

scrumhalf

quarky said:

CabbageCat said:

What do you mean by "not fully"? Do you mean that Capital Gains only kicks in after ~£10k profit? Or that people have ~£10k free savings in ISAs? Or do you simply mean that the investment returns aren't "fully" taxed because the tax rate isn't 100%.

Because there ways of ensuring that they don't get taxed through the use of various trusts, and companies. This allows the wealth to keep on increasing and as I wrote above, the gap between rich and poor to continue to rise.

Why does the gap between rich and poor matter? It only matters if, according to whatever metric you wish to use, the poor do not have "enough".

quarky

No it is that the tax isn't working well enough to close that gap, like it used to if you go back 50 years.

If people stopped hiding stuff, I am not sure if that would be enough either. We are probably already at the stage where the richest 1% own more than the other 99%. What happens when the richest 1% own not 50%, but 75%? 90%? 99%? That could be a long way a way. It could never happen, but what do you think is going to stop that happening?

scrumhalf said:

Why does the gap between rich and poor matter? It only matters if, according to whatever metric you wish to use, the poor do not have "enough".

If we lived in a world of infinite resources, it would matter less. Unfortunately we don't. Lets say the richest man in the village owned 90% of the wealth. What is he going to spend it all on? Whose houses are the rest of the population going to live in? Don't bother answering, those are rhetorical, but I am sure you can think of some problems..

Fretwired

quarky said:

Fretwired said:

Investments and funds are already taxed ..

Not fully. If I have £5m invested, that easily earn £300k/year long term. When compounded that is phenomenal increase. For someone with £100m, it is obviously even higher. And existing tax structures don't impact this significantly.

More people used to recognise this as a problem which is partly why for several decades, due to higher tax rates in the US, UK and other places, the gap between rich and poor shrank, and the middle class developed. Or at least the growth in the gap slowed. Since the 80's that trend has reversed, and the gap is on course to be bigger than ever. Maybe you think that is fine. I don't think it is particularly healthy.

And please don't say simply envy. You have no idea of my motivations. Like probably everyone here, a  larger redistribution of wealth would make me worse off financially because (again like probably everyone here), I am pretty privileged compared to most people in the world.

Forget people with serious money. It won't be in the UK and if you turn up with wacky tax measures they'll just leave the country. And I get fed up with people who say trusts are tax dodges - they are not. Money can be put in place for future generations - income tax is paid on a trust from day one.

chrispy108

You'd probably be happier moving here @quarky

http://assets.fodors.com/destinations/170/havana-cuba_main.jpg

Snap

ICBM said:

Snap said:

That is very very different to accumulation of value in a residential property.  Your residence is not, and IMHO should not be seen as something you have to pay capital gains tax on. Again, IMO that is immoral and close to theft.

Why? If you make a vast profit on it it's unearned income. Although I would exempt that if the whole of the proceeds are used to buy another residence, since you have not had the money out as income.

Same with inheritance tax. It's not being taxed twice on the same income, as Cameron recently claimed - it's not the deceased who pays. It's the heirs, who have just been given an asset worth tens or hundreds of thousands of pounds for free and which if they sell it represents an enormous untaxed income. Hence why it *should* be taxed.

But I entirely agree that taxing an asset which is *not* sold or passed on is not right. The increase in value is only notional until it is actually sold.

I don't think that you shuold pay tax on profits from selling your home, and I don't agree with IHT. I see both as totally wrong, in principle. Its a standpoint, personal opinion.

You pay stamp duty when you buy a house, which in itself is enough tax on residential property, again IMO. I don't agree with stamp duty either.

this whole idea of taxing personal assets though. FFS what is this - The People's Republic of England or something? What next, a tax on how many shoes you own??? Mental.

quarky

chrispy108 said:

You'd probably be happier moving here @quarky

Thanks but no. The cornering of wealth isn't what capitalism is about either. We are in danger of heading back to levels of inequality not seen since the middle ages (OK, slight artistic licence maybe, but you get the idea).

Fretwired

quarky said:

No it is that the tax isn't working well enough to close that gap, like it used to if you go back 50 years.

If people stopped hiding stuff, I am not sure if that would be enough either. We are probably already at the stage where the richest 1% own more than the other 99%. What happens when the richest 1% own not 50%, but 75%? 90%? 99%? That could be a long way a way. It could never happen, but what do you think is going to stop that happening?

It's not a case of hiding stuff. The seriously wealthy are mobile and need cash in different locations - it's not all about tax dodging. The UK has few seriously wealthy people - I think one small area in California has more billionaires than the whole of the UK. If you are seriously wealthy don't keep all your money in one country and if you want to live in the US or Switzerland you have to keep cash there. You may also want to invest in other countries which you can't do from the UK. And if people have an international lifestyle why should they pay 100% of their tax in the UK.

CabbageCat

quarky said:

No it is that the tax isn't working well enough to close that gap, like it used to if you go back 50 years.

If people stopped hiding stuff, I am not sure if that would be enough either. We are probably already at the stage where the richest 1% own more than the other 99%. What happens when the richest 1% own not 50%, but 75%? 90%? 99%? That could be a long way a way. It could never happen, but what do you think is going to stop that happening?

Why should anyone care how much the rich own? If the 99% suddenly became twice as rich (in real terms) and the top 1% got 6 times as rich then they would indeed own 75% of the world's wealth. Would that continue to upset you? Even though the 99% were still twice as rich?

My take on inequity of property is "mind your own f*cking business". The only wealth that matters to me is mine.