Thank you for listening, you can find the full IFS report on Capital gains tax reform here: ifs.org.uk/publications/capital-gains-tax-reform Our podcast live event is filling up fast, you can register here: ifs.org.uk/events/ifs-zooms-live-how-make-your-first-budget-success Timecodes: 00:00 Introduction: The Beatles and Capital Gains 00:28 Welcome and IFS Live Event Announcement 01:20 Capital Gains Tax and the Budget 03:02 What is Capital Gains Tax? 04:00 Who Pays Capital Gains Tax? 06:00 Why Capital Gains Tax Exists 07:12 Examples of Converting Income to Capital Gains 09:10 Capital Gains Tax and Incentives 10:13 Three Types of Capital Gains 11:39 Complications in Raising CGT Rates 13:45 Fixing the Tax Base 16:07 Business Owners and Capital Gains 18:45 A Better System for Taxing Labour and Investment 21:01 Business Asset Disposal Relief (BAD Relief) 23:35 Should Entrepreneurs Get Tax Relief? 26:43 Carried Interest and Private Equity 32:03 Capital Gains Tax at Death 36:10 Avoiding Capital Gains by Moving Abroad 38:00 Closing Remarks: CGT Reform and Budget Concerns
Regarding entrepreneurs. If you have a great idea, it doesn’t necessarily mean it’s going to happen. The failure rate of startups is very high and entrepreneurs need the chance of a life changing exit in order to throw themselves into a risky venture. Most entrepreneurs don’t think too much about CGT rates because they’re relatively low. If they increase towards the income tax rate then the incentives for entrepreneurs change drastically and you will see far fewer entrepreneurs bothering to start companies which will hurt the UKs competitiveness
I partially agree but mostly disagree to be honest - the main thing is that it makes the UK less attractive to starting a company than abroad. If every country had the same tax rules, then businesses, finance and individuals wouldn’t be incentivised to shop around. The other big thing even though it may be fair to change the tax rules, people aren’t likely to appreciate changes that adversely impact them. You might not have many wealthy altruistic pensioners saying that getting rid of the winter fuel payment subsidy is good, even when it is still being kept for the poorest pensioners.
Strongly agree, the 'Life changing exit' is key. Nobody is going to re-mortgage their house or risk a good retirement for a 2x or 3X income. The risk, effort and family sacrifice required to market an idea so uncertain nobody is already pursing it requires lottery level returns.
Really interesting info, cheers. In very simple terms if CGT goes up too much the average wage earners are going to only use ISA or pensions to invest as the cost on profits wont be worth the risk.
Aren't the stats on how many people pay capital gains tax based on data from several years ago when the allowance was 2x or 4x what is now, and possibly 8x what it's about to become?
Reinstating indexation with the ability to backdate it to the purchase date, may stimulate property sales. This may push property prices lower and help out new buyers
You are missing that retained profits have already been subject to corporation tax. So when selling a buisness you have already paid Corporation tax on profits, then pay GGT on top of that.
Remember, Dan had the top job at Clifford Chance, earned multi millions per year. All these tax hikes are designed to keep the lower and middle earners where they are
If CGT is raised, or the allowance reduced/abolished, I will put asset disposals on hold until Labour is booted out of office. Reeves will then see a reduction in my spending and in her VAT receipts.
Yep me too... CGT will dry up and once again they'll have a fall in Tax collection. They need a smaller more efficient and capable state, you wouldn't need high tax and money grabbing politicians then.... They wasted 108,000 Tax payers money who pay £5k Tax a year on a scrapping Rwanda.... Imagine how livid you'd be paying your whole year's tax for it to be burned with no UK benefits 🤔
Fear and uncertainty create major wealth. It's those who take the risk and have strong gut to endure the bloody days. When i notice extreme dips i tend to actually move more money to crypto
It’s really heartbreaking to see how inflation and recession impact low-income families. The cost of living keeps rising, and many struggle just to meet basic needs, let alone save or invest. It’s a reminder of the importance of finding ways to create financial opportunities. You've helped me a lot sir Brian! Imagine i invested $50,000 and received $190,500 after 14 days
Some persons think inves'tin is all about buying stocks; I think going into the stock market without a good experience is a big risk, that's why I'm lucky to have seen someone like mr Brian C Nelson.
It would have been interesting to hear some discussion on the principal residence exemption, which seems just to be seen as untouchable but, as someone else notes, distorts the property market. Bring them in scope and abolish stamp duty on residential property purchases.
Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account. I'm now seeking best possible areas or ways to gain wealth in today's economy.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Private investing is the best way to go about the market right now, especially for near retirees, I've been in touch with a wealth manager, netted 370K the last downturn, made it clear there's more to the markets than we average joes know.
I'm cautious about giving specific recommendations as everyone's situation varies. Consider independent financial advisors like "Kathie Daisy Bosco" I've worked with her since the pandemic and highly recommend her. You can check if she meets your criteria.
Kathie has the appearance of being a great authority in her profession. I looked her up online and found her website, which I reviewed and went through to learn more about her credentials, academic background, and employment. She has a fiduciary duty to protect my best interests. I sent her an email outlining my objectives and also booked a session with her; thanks for sharing.
Sole traders already take a risk's by not getting employment benefits and having an irregular income. With the capital gains rates now if they want to close their business the total tax% is corporation tax + capital gains tax (excluding BADR). So that's around 40% already. I think doing limits on larger transactions is fine but for small companies or contractors, I think it's just going to force people to work full time for larger companies and corporations.
If you're running your business properly then the risks you're taking should be compensated by a higher personal income. You shouldn't need other tax payers to pick up the slack by giving you a permanent tax break. Yes, we want to incentivise new business and sensible risk taking, but as Helen mentioned, CGT is a terrible way to do that. One of the reasons we're so unproductive in this country is we prop up lots of little unviable businesses for no reason. If we want growth we need to let go of some of that dead weight. The brutal truth is a lot of those people would indeed be more productive if they went back to work at a larger company. I say all this as a small business owner myself. I would happily pay a higher CGT rate assuming it was indexed properly.
There r a lot of self employed people who r making fortune running around m3 BMS and ranger rovers paying very little,it's almost impossible get a receipt from a plumber, builder or spark
@@sopissedoff Not getting receipts or people not putting money on their books has nothing to do with capital gains tax, if they aren't putting it on their books then that's tax evasion a completely different problem.
@@malonetv721 Yes sure but then would you be okay with having CGT at the same level as income tax? Surely that's too much. Even in Australia, you get a discount if you've held the asset for a certain time (which I agree with). Making many changes in one go could have many unforeseen circumstances and not really raise that much money. Most of the money lost is due to fraudulent companies (Dan Neidle points out 10 billion for R and D tax relief which is mainly a scam).
And? We are taxed on our income twice the taxed again when we buy something and taxed again if the price of that thing goes up. It’s layers of taxes to fund the bloated government and its army of civil servants and consultants.
Why is Double taxation an inherently bad thing? For example, average-income earners contribute to VAT receipts does that mean that their same income shouldn't contribute to Income Tax or National Insurance?
@aidanbarber1524 you aren't wrong. But if the logic is to put it the same as income tax then business tax should be accounted for. Minor point really and agree on the principle taking into account inflation.
Why isn't tax and capital gains index linked.? Many gains of assets are mainly nominal gains only an not a real gain when inflation (currency debasement) is considered. Bit of a scam really.
Anything that damages or removes the power of EMI schemes from startups will overnight kill the entire tech startup space in the UK. The only way to get by in the early years is usually to give away lots of EMI options to the staff who join at that time - who take on huge personal risk, taking far below market rate salaries in hope of making this new business a success. They do this because they believe it can work and that the loss in salary can be made up later via selling the shares - because of how tax efficient they are. Without the tax relief, staff would need huge allocations of options to bridge the gap and its just not realistic. I think the £1m cap is a pretty reasonable system. Lowering it to £500k would probably also be alright.
You would be better creating a management or interest charge as this would also circumvent the corporation tax. These sorts of tax structures are common with VC/PE.
Great video - Any chance that Helen could talk just a little slower? She has a fast mind and she almost memory dumps at the fastest speed her mouth can manage. Well in honesty faster than she can speak sometimes. I have to put subtitles on and hit pause repeatedly. Though her inputs are pure gold. Thanks for another great video.
@@yesmarioo Thanks for coming back with that. Of course I can, were there only to be one person being recorded. It would mean changing the speed back and forth many times to watch the video and that is untenable. Besides if I am struggling then many others will be struggling too. Do they want to make videos that can be played and understood without great mucking about? My post was a plea that they pay attention to this one small thing. The content is so very excellent.
Why was there no mention of the fact company owners pay Corporation Tax on the money "left in their companies", before they then "turn it into Capital Gains"? It feels like the IFS is trying to stir up resentment by omitting this important fact.
The fact that they are not withdrawing the money through a director’s salary to put in a pension/ ISA suggests the amount retained is well in excess of the respective annual allowances. Consequently, any investment growth on the taxed income withdrawn would be subject to additional income tax or CGT. Keeping money in the company is a good way to reduce these charges which is why from the 1960s to 1980s we had ‘close company’ rules that regulated the practice of small companies retaining profit to reduce income tax liabilities. All this is a roundabout way of saying the bill from corporation tax then CGT when selling is much lower than if the profit was extracted as a dividend or remuneration then reinvested.
What these tax lovers ignore is the constant devaluation of our currency in which assets are priced in. Then ta-da, its a 'gain' and we owe 75% of our assets to HMRC in the form of CGT and IHT. Its left, to keep the lower and middle earners from rising to the level of 'old money', while they remain unaffected.
@charlotte28518 old money is established business and assets that are protected by the system they have part control over. Old business likes high regulation to prevent new entrants from taking over, they face some tax but its not existential. Old money in power prevents new money from getting into high positions of power, you have to be from the right family, background, school, club to excel in thier world.
Slow down Helen-it may be clear in your head, but you speak very quickly and run words together; it makes me switch off when you’re speaking. Also, it leaves the viewer/listener with the impression that your thinking is knee-jerk rather than reflective thinking
Around minute 15, guy talking about investment in growth vs investment in divi stocks....does he actually get how difficult it is to find those winning growth stocks....it's like finding a needle in a haystack. You can buy a divi stock, and get your dividend, no problem. That's the problem with the IFS, they're clueless. If you don't understand the investment process then you don't understand how to organise the tax system accordingly.
Changing the tax base as Helen outlines makes CGT a more sensible tax. Having the exemption for principle private residence from CGT, causes distortion, and leads to the housing affordability issues we are currently seeing. SDLT as a transaction tax have many negative outcomes. Its expensive to move home to take up a new job, or to relocate closer to family for care. By bringing principle private residence in scope of CGT and abolishing SDLT (on housing or wholly) this would be beneficial. It would make investment in public infrastructure more affordable, some of benefit would be directly captured by the tax system in uplift in property value near that public infrastructure investment. As most people dont pay CGT every year some kind of rolling 10 year allowance or similar may be appropriate rather than having an annual allowance. Clearly you would need to have some anti avoidance measure showing that you were UK tax resident for the period you wish to use the allowance for. This would be a way of tempering the further affordable growth of house prices in the south east without crashing the market. Furthermore by reforming other types of property taxation then other beneficial behaviors could be promoted, ie basing the tax rate in part on the housing EPC, this would provide market pressure to improve the UK's housing stock rather than trying to legislate through diktat that boilers be banned or property under band C cant be rented out.
I am really enjoying IFS Zoom In. Thank you. Re this discussion of CGT, in the examples used by Helen and Dan to compare being employed versus operating through a personal services company (PSC), they omit to mention corporation taxes on the PSC. Surely the comparison should be based on the total taxes suffered (i.e. corporation tax + CGT vs PAYE). Of course, there still may be a benefit to operating through a PSC, but it is not as significant as the CGT vs PAYE comparison suggests. Also, it’s possible that Helen’s cake making business will flourish, in which case she’ll also be subject to VAT on her sales. Best regards, John
A few things that were conveniently or unfortunately left out during this video. Business Asset disposal relief is a lifetime relief, meaning you can make use of the reduce rate up to £1m once in your lifetime. If you sell multiple business for more than £1m, you do not get to reuse this relief once you have used up your first £1m allowance. Secondly, the reason why CGT is ‘washed out on death’ is because your estate on death will be potentially liable to inheritance tax. To avoid double taxation, the government has been so kind as to forgive any CGT on death, although the estate of the deceased will be liable to IHT, which for the most part will be significantly higher than any rate of CGT.
CGT relief on death made sense when it was introduced in 1971 as Estate Duty was all encompassing. However, since 1992 (1995 for AIM shares) business property has enjoyed 100% relief from taxation, meaning that shares in an unlisted company are not subject to Inheritance Tax. As a consequence, CGT relief no longer makes sense.
I found it crazy, that there's no talk anywhere about making government, smaller, what you can't make smaller at least more efficient and streamlined rather than finding ways to tax more here and there. We shoud be looking to tax everyone, the rich and the poor less so there's more investment and freedom and ultimately, growth.
It’s insane isn’t it. I mean just look at how everyone went for the £20 billion hole in the budget. You’re telling me a government that spends £1 trillion a year can’t find ways to make up for 2% deficit in its budget? Anddd, the thing that really is insane is that the government has increased tax on everyone due to fiscal drag. They’ve been taxing more and more every year due to fiscal drag. Where is all the money going?
Very interesting discussion as always. I love it when you get Dan on. It'll be interesting to see if Rachel Reeves implements a sensible policy like you're suggesting, or if the politics gets in the way. The only reason for "uplift on death" that I can think of is that it is often very hard to work out the original purchase price of an asset after someone has died (unless they kept very good records). I don't know if there's a good way to deal with those situations.
Good point, I suppose a nasty way to do it would be to assume 100% gain. Then if they want to avoid some of the tax, they can sort it out for you before they die.
Personally., I'm worried about having a sudden hit on the rental property I own. Should I sell up now or not? Having had the property since new in the early 90's I will extremely angry if the investment is suddenly hit with an increase in CGT after holding it all these years. Please consider a video on this specifically, as there must be a million people like me.
good videos, but how about making a series on how to boost efficiency on equal (or enhanced) public services etc, so tax can go down INSTEAD of perpetually seeking ways to increase tax e.g. by making it "fairer"
Don't get the example someone pays no tax when they die. IHT? also that's 40% not 10, 18, 20, 24%. We need a fair tax system to pay for transparent services that are accountable with service level agreements. All should pay not just some. (above a minimum limit). This channel seems to have a sole purpose to push more taxes. Not really a fiscal study agenda more a tax more think tank.
They never discuss risk and that we rely on people to take risks with businesses but also investments. Also if someone makes a savvy investment and coups a great return within 2 or 3 years then they should be rewarded for that, whereas talking the headline rate to 45%, even with a relief for inflation is still way too much of a disincentive. I'd rather hoard my money tbh or even move abroad. These people are academics at heart and will never understand what it takes to take huge risk or create real economic value.
You have also already been taxed on any money you invest so then CGT taxes you AGAIN on the amount you yield on your investment. So you're being taxed twice on the same money. To take that up to 45% (even w/indexation relief) is scandalous. Yes some people convert their income to capital in a business but why should the rest of us suffer just to deal with people who are doing that?
Risk is a choice. Risk is inherent in anything you do, so why would they need to reiterate the self evident. How are you taxed again on investment gains you just made? The capital gain is taxed, not the principal. You seem confused.
@@cfalvl2380 no I'm sorry but the risk in going to work to earn an hourly wage is in no way comparable to that of investing in assets or businesses. You can't go to work and lose money but you can invest and lose money. So why on God's earth would you make the tax rate the same as income tax? Plus you've already been taxed on that money you've invested. I can't believe people can't see how insane this proposal is. As mentioned, I would (and will) entirely change my strategy if that comes in and will invest far less, or indeed move
@@cfalvl2380lots of people that have clearly never made an investment here. You pay income tax and Nat insurance tax on your earnings. Then u pay mortgage and living costs and that tiny bit u have left over after, u invest that. Then you pay capital gains on any profits. So you’re getting taxed twice. A 40% income tax payer would be paying up to 80% in tax if they raise capital gains to 40%. When you invest you have no guarantee you will ever see a return on your investment. So why would people invest? Anyone with investments realises this and will withdraw the bare minimum while labour are in power. Because reform will definitely pledge to reverse them if they get in. And likely conservatives would do the same. Labour will end up with less money.
I dont agree wiht ';wow these people are very rich'. I am not rich, but I paid quite a bit in CGT last year due to the tax laws on crypto currency use. A lot of people in my community are very worries about the changes and are considering leaving the UK as a result.
Doesn't that depend on what you did to earn the money? If you only have a large CGT bill because your crypto gained value (without you doing any actual work) then what's the issue?
@@BonBonUK Whether gained through work or through sitting there, neither should deserve a lower tax rate than most people pay through income tax and national insurance.
I remember Labour moaning that the conservatives after Brexit wanted to turn London into Singapore-on-Thames. Well, yes, that would be awesome - we would love that please!
@@elliotts4173 If a sole trader earns through dividends or capital gains they pay a lower rate than everyone else who earns through income tax and national insurance.
what clearly isn't "fair" is more wealthy hard-working people paying in a higher % of their income in tax (excluding those using elaborate legal tax avoidance schemes). governments around the world have become dependent on this normalised abhorent unfairness, then claim they're seeking "fairness" = bizarre
It's because wealthy people are more mobile which moves the Laffer Curve for that group to the left. It's just far easier to exploit working people and so that's what politicians do because that's often their only option. In my opinion if we want things to be fairer the best thing we can do is lower income tax, but obviously people don't like that either because they want their public services. I'm not sure there's any winning here.
I don't think there's a good reason to have a lower rate for investments than for Labour. 14:13 "If it's just a normal return, don't tax it" This is precisely what we should tax!
@@Rob_Davidson82 Honestly, they will still probably make a lot of profit even with tax rates similar to the staff they employ, so the lower tax rate is unnecessary. Also, the entrepreneur has just as much protection from risk as the poor worker, poor unemployed or poor child. If the welfare system is insufficient for the entrepreneur it is also insufficient for the whole of society.
How about entrepreneurs, just move abroad and not do anything in the UK.... Then you wouldn't have a Tax problem at All.... Well apart from the Top 10% pay 60% of your Tax... How about you have a smaller more efficient state, with lower taxes and higher growth You could try running a business yourself and understanding there's no one with a fat pension, or sick pay or anything else supporting you, now you want to bombarded by HMRC too.... Best just leave the UK let it die out, without the 60% it needs to fund the 55% of the population that takes more from the Tax payer than they contribute
It's only getting worse. Earner over £100k and you won't get the child care you're paying for in tax, you're hit with a 62% stealth tax and your mortgage is already sky high, and I'm still in a 3 bed semi. God forbid I choose to live in the south east near the only city with work. Can't wait to leave and take my two young kids elsewhere
That person (top 10%) who pays 60% of tax has most likely profited (and in a significantly disproportionate manner) on the back of the people they employed and probably exploited (the other 55%). So it is not a simple case of higher tax payers subsiding or funding the other tax payers.
@@CmdrTobs Here are some relevant statistics: CEO-to-Worker Pay Ratio: In 2023, CEOs of S&P 500 companies made, on average, 268 times the median income of their employees. This disparity has grown steadily over the years; in 1965, the ratio was just 20-to-1 CEO Compensation Growth: From 1978 to 2023, CEO compensation has skyrocketed by 1,085%, while the typical worker’s compensation increased by only 24% over the same period.
I'll move over to the Chagos Islands; I understand Mauritius is a tax haven and a lot warmer. Of course, I'm joking about the point here the UK isn't worth remaining in.
They all seem to play down their individual earnings but I suspect that they are all quite wealthy. It would surprise me that none of them have invested in shares , stocks or property as they are, after all, finance/tax experts. If they are condoning an increase of CGT then they would be harming their own earnings. So, all I can conclude is that none of them have any assets that would be taxed in the way they are suggesting (or more importantly I suspect they have protected themselves against such rises). Personally I agree that CGT needs rationalising and I am happy if CGT is increased to reflect income tax bands but it must be combined with an Indexation relief.
It's still too high relatively. I personally wouldn't have made half the investment decisions I have over the years had CGT been in line with income tax (even with indexation relief). I'd rather keep my money or move abroad frankly
You can put 20k in an ISA and 60k in a pension every year. And pay no CGT on gains. This is how the 99% (includung wealthy IFS employees) buy and own assets outside their primary residence (also free of CGT). If as a couple you can invest more than 160k a year then you damn well should be paying tax on those additional investments.
@@martineyles you don't understand risk do you. I'm not here to take risk for other people. I take risk, like any other investor, in the hope of a reasonable return. When you take away the promise of a reasonable return I will stop investing. How the hell is that selfish?
Thank you for listening, you can find the full IFS report on Capital gains tax reform here:
ifs.org.uk/publications/capital-gains-tax-reform
Our podcast live event is filling up fast, you can register here: ifs.org.uk/events/ifs-zooms-live-how-make-your-first-budget-success
Timecodes:
00:00 Introduction: The Beatles and Capital Gains
00:28 Welcome and IFS Live Event Announcement
01:20 Capital Gains Tax and the Budget
03:02 What is Capital Gains Tax?
04:00 Who Pays Capital Gains Tax?
06:00 Why Capital Gains Tax Exists
07:12 Examples of Converting Income to Capital Gains
09:10 Capital Gains Tax and Incentives
10:13 Three Types of Capital Gains
11:39 Complications in Raising CGT Rates
13:45 Fixing the Tax Base
16:07 Business Owners and Capital Gains
18:45 A Better System for Taxing Labour and Investment
21:01 Business Asset Disposal Relief (BAD Relief)
23:35 Should Entrepreneurs Get Tax Relief?
26:43 Carried Interest and Private Equity
32:03 Capital Gains Tax at Death
36:10 Avoiding Capital Gains by Moving Abroad
38:00 Closing Remarks: CGT Reform and Budget Concerns
Regarding entrepreneurs. If you have a great idea, it doesn’t necessarily mean it’s going to happen. The failure rate of startups is very high and entrepreneurs need the chance of a life changing exit in order to throw themselves into a risky venture.
Most entrepreneurs don’t think too much about CGT rates because they’re relatively low. If they increase towards the income tax rate then the incentives for entrepreneurs change drastically and you will see far fewer entrepreneurs bothering to start companies which will hurt the UKs competitiveness
I partially agree but mostly disagree to be honest - the main thing is that it makes the UK less attractive to starting a company than abroad. If every country had the same tax rules, then businesses, finance and individuals wouldn’t be incentivised to shop around.
The other big thing even though it may be fair to change the tax rules, people aren’t likely to appreciate changes that adversely impact them. You might not have many wealthy altruistic pensioners saying that getting rid of the winter fuel payment subsidy is good, even when it is still being kept for the poorest pensioners.
Strongly agree, the 'Life changing exit' is key. Nobody is going to re-mortgage their house or risk a good retirement for a 2x or 3X income.
The risk, effort and family sacrifice required to market an idea so uncertain nobody is already pursing it requires lottery level returns.
Put timestamps on these podcasts please ❤️
This is one of the best podcasts at the moment! Keep up the great work! Very informative and interesting 👍
You and your viewers are such dolts.
I agree, really elevating debate to a higher level. Very informative
These podcasts are excellent, thank you. Very informative and educational
Really interesting info, cheers. In very simple terms if CGT goes up too much the average wage earners are going to only use ISA or pensions to invest as the cost on profits wont be worth the risk.
Aren't the stats on how many people pay capital gains tax based on data from several years ago when the allowance was 2x or 4x what is now, and possibly 8x what it's about to become?
The good old days of the £12300 allowance.
Reinstating indexation with the ability to backdate it to the purchase date, may stimulate property sales. This may push property prices lower and help out new buyers
You are missing that retained profits have already been subject to corporation tax. So when selling a buisness you have already paid Corporation tax on profits, then pay GGT on top of that.
These ppl love tax, champagne socialists.
They are two different things, and two different entities.
Remember, Dan had the top job at Clifford Chance, earned multi millions per year. All these tax hikes are designed to keep the lower and middle earners where they are
He was paying 47%!
@@dertery8724 I pay 62% and earn a fraction
@@sirrodneyffing1 He probably worked as a freelancer (before IR35 was tightened) which avoids employer NICs.
If CGT is raised, or the allowance reduced/abolished, I will put asset disposals on hold until Labour is booted out of office. Reeves will then see a reduction in my spending and in her VAT receipts.
Yep me too...
CGT will dry up and once again they'll have a fall in Tax collection.
They need a smaller more efficient and capable state, you wouldn't need high tax and money grabbing politicians then....
They wasted 108,000 Tax payers money who pay £5k Tax a year on a scrapping Rwanda.... Imagine how livid you'd be paying your whole year's tax for it to be burned with no UK benefits 🤔
How would you resolve the problem?
Fear and uncertainty create major wealth. It's those who take the risk and have strong gut to endure the bloody days. When i notice extreme dips i tend to actually move more money to crypto
It’s really heartbreaking to see how inflation and recession impact low-income families. The cost of living keeps rising, and many struggle just to meet basic needs, let alone save or invest. It’s a reminder of the importance of finding ways to create financial opportunities. You've helped me a lot sir Brian! Imagine i invested $50,000 and received $190,500 after 14 days
Absolutely! Profits are possible, especially now, but complex transactions should be handled by experienced market professionals.
Some persons think inves'tin is all about buying stocks; I think going into the stock market without a good experience is a big risk, that's why I'm lucky to have seen someone like mr Brian C Nelson.
Finding yourself a good broker is as same as finding a good wife, which you go less stress, you get just enough with so much little effort at things
I'm surprised that you just mentioned and recommend Mr Brian Nelson. I met him at a conference in 2018 and we have been working together ever since.
Capital tax should be the same as income tax ..... Because it's an income. !
It would have been interesting to hear some discussion on the principal residence exemption, which seems just to be seen as untouchable but, as someone else notes, distorts the property market. Bring them in scope and abolish stamp duty on residential property purchases.
Increasing tax rates are the reason I rolled over my 401k to a Roth. I don’t want to be 59 paying taxes on current income on withdrawals made from my retirement account. I'm now seeking best possible areas or ways to gain wealth in today's economy.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Private investing is the best way to go about the market right now, especially for near retirees, I've been in touch with a wealth manager, netted 370K the last downturn, made it clear there's more to the markets than we average joes know.
Who is this Adviser or investor you use? I lost over 35000 already this year, I’m in need of a planner going forward.
I'm cautious about giving specific recommendations as everyone's situation varies. Consider independent financial advisors like "Kathie Daisy Bosco" I've worked with her since the pandemic and highly recommend her. You can check if she meets your criteria.
Kathie has the appearance of being a great authority in her profession. I looked her up online and found her website, which I reviewed and went through to learn more about her credentials, academic background, and employment. She has a fiduciary duty to protect my best interests. I sent her an email outlining my objectives and also booked a session with her; thanks for sharing.
Sole traders already take a risk's by not getting employment benefits and having an irregular income. With the capital gains rates now if they want to close their business the total tax% is corporation tax + capital gains tax (excluding BADR). So that's around 40% already. I think doing limits on larger transactions is fine but for small companies or contractors, I think it's just going to force people to work full time for larger companies and corporations.
@@Pirake123 spot on, they had a 40 minutes talk about Capital gains and didn't mention risk once
If you're running your business properly then the risks you're taking should be compensated by a higher personal income. You shouldn't need other tax payers to pick up the slack by giving you a permanent tax break.
Yes, we want to incentivise new business and sensible risk taking, but as Helen mentioned, CGT is a terrible way to do that. One of the reasons we're so unproductive in this country is we prop up lots of little unviable businesses for no reason. If we want growth we need to let go of some of that dead weight. The brutal truth is a lot of those people would indeed be more productive if they went back to work at a larger company.
I say all this as a small business owner myself. I would happily pay a higher CGT rate assuming it was indexed properly.
There r a lot of self employed people who r making fortune running around m3 BMS and ranger rovers paying very little,it's almost impossible get a receipt from a plumber, builder or spark
@@sopissedoff Not getting receipts or people not putting money on their books has nothing to do with capital gains tax, if they aren't putting it on their books then that's tax evasion a completely different problem.
@@malonetv721 Yes sure but then would you be okay with having CGT at the same level as income tax? Surely that's too much. Even in Australia, you get a discount if you've held the asset for a certain time (which I agree with). Making many changes in one go could have many unforeseen circumstances and not really raise that much money. Most of the money lost is due to fraudulent companies (Dan Neidle points out 10 billion for R and D tax relief which is mainly a scam).
Thanks for helping us noobs understand not just the policies but the context and history which placed them there.
Isn’t this missing a point that a business is taxed on its profits, so if they keep the profits and and sell the business this is double taxation?
And? We are taxed on our income twice the taxed again when we buy something and taxed again if the price of that thing goes up. It’s layers of taxes to fund the bloated government and its army of civil servants and consultants.
Why is Double taxation an inherently bad thing? For example, average-income earners contribute to VAT receipts does that mean that their same income shouldn't contribute to Income Tax or National Insurance?
@aidanbarber1524 you aren't wrong. But if the logic is to put it the same as income tax then business tax should be accounted for. Minor point really and agree on the principle taking into account inflation.
Low taxes that everyone pays will always trump high taxes that no one pays
Why isn't tax and capital gains index linked.? Many gains of assets are mainly nominal gains only an not a real gain when inflation (currency debasement) is considered. Bit of a scam really.
Generally speaking when people wonder why something is strange about our tax system the answer is Gordon Brown!
Anything that damages or removes the power of EMI schemes from startups will overnight kill the entire tech startup space in the UK. The only way to get by in the early years is usually to give away lots of EMI options to the staff who join at that time - who take on huge personal risk, taking far below market rate salaries in hope of making this new business a success. They do this because they believe it can work and that the loss in salary can be made up later via selling the shares - because of how tax efficient they are. Without the tax relief, staff would need huge allocations of options to bridge the gap and its just not realistic. I think the £1m cap is a pretty reasonable system. Lowering it to £500k would probably also be alright.
Even better, leave the UK and withdraw dividends from the company in a 0% jurisdiction. Double win.
You would be better creating a management or interest charge as this would also circumvent the corporation tax.
These sorts of tax structures are common with VC/PE.
Wow - Dan made a mistake! Indexation relief wasn't abolished, it was frozen in 2017
Great video - Any chance that Helen could talk just a little slower? She has a fast mind and she almost memory dumps at the fastest speed her mouth can manage. Well in honesty faster than she can speak sometimes. I have to put subtitles on and hit pause repeatedly.
Though her inputs are pure gold.
Thanks for another great video.
You can set the speed of the video in settings so you can easily slow it down.
@@yesmarioo Thanks for coming back with that. Of course I can, were there only to be one person being recorded. It would mean changing the speed back and forth many times to watch the video and that is untenable.
Besides if I am struggling then many others will be struggling too.
Do they want to make videos that can be played and understood without great mucking about?
My post was a plea that they pay attention to this one small thing. The content is so very excellent.
Why was there no mention of the fact company owners pay Corporation Tax on the money "left in their companies", before they then "turn it into Capital Gains"? It feels like the IFS is trying to stir up resentment by omitting this important fact.
The fact that they are not withdrawing the money through a director’s salary to put in a pension/ ISA suggests the amount retained is well in excess of the respective annual allowances. Consequently, any investment growth on the taxed income withdrawn would be subject to additional income tax or CGT. Keeping money in the company is a good way to reduce these charges which is why from the 1960s to 1980s we had ‘close company’ rules that regulated the practice of small companies retaining profit to reduce income tax liabilities.
All this is a roundabout way of saying the bill from corporation tax then CGT when selling is much lower than if the profit was extracted as a dividend or remuneration then reinvested.
CGT should be same level as Income tax for locals, foreign investors can get can be offered an internationally competitive rate.
Entertaining and informative. Enjoyed it.
What these tax lovers ignore is the constant devaluation of our currency in which assets are priced in.
Then ta-da, its a 'gain' and we owe 75% of our assets to HMRC in the form of CGT and IHT. Its left, to keep the lower and middle earners from rising to the level of 'old money', while they remain unaffected.
Why are the ‘old money’ people unaffected?
@charlotte28518 old money is established business and assets that are protected by the system they have part control over. Old business likes high regulation to prevent new entrants from taking over, they face some tax but its not existential. Old money in power prevents new money from getting into high positions of power, you have to be from the right family, background, school, club to excel in thier world.
Slow down Helen-it may be clear in your head, but you speak very quickly and run words together; it makes me switch off when you’re speaking. Also, it leaves the viewer/listener with the impression that your thinking is knee-jerk rather than reflective thinking
She wants to double tax you and is very smug about it
Good podcast but my head rather explodes 👍
Around minute 15, guy talking about investment in growth vs investment in divi stocks....does he actually get how difficult it is to find those winning growth stocks....it's like finding a needle in a haystack. You can buy a divi stock, and get your dividend, no problem. That's the problem with the IFS, they're clueless. If you don't understand the investment process then you don't understand how to organise the tax system accordingly.
Changing the tax base as Helen outlines makes CGT a more sensible tax. Having the exemption for principle private residence from CGT, causes distortion, and leads to the housing affordability issues we are currently seeing. SDLT as a transaction tax have many negative outcomes. Its expensive to move home to take up a new job, or to relocate closer to family for care.
By bringing principle private residence in scope of CGT and abolishing SDLT (on housing or wholly) this would be beneficial. It would make investment in public infrastructure more affordable, some of benefit would be directly captured by the tax system in uplift in property value near that public infrastructure investment.
As most people dont pay CGT every year some kind of rolling 10 year allowance or similar may be appropriate rather than having an annual allowance. Clearly you would need to have some anti avoidance measure showing that you were UK tax resident for the period you wish to use the allowance for. This would be a way of tempering the further affordable growth of house prices in the south east without crashing the market.
Furthermore by reforming other types of property taxation then other beneficial behaviors could be promoted, ie basing the tax rate in part on the housing EPC, this would provide market pressure to improve the UK's housing stock rather than trying to legislate through diktat that boilers be banned or property under band C cant be rented out.
I am really enjoying IFS Zoom In. Thank you. Re this discussion of CGT, in the examples used by Helen and Dan to compare being employed versus operating through a personal services company (PSC), they omit to mention corporation taxes on the PSC. Surely the comparison should be based on the total taxes suffered (i.e. corporation tax + CGT vs PAYE). Of course, there still may be a benefit to operating through a PSC, but it is not as significant as the CGT vs PAYE comparison suggests. Also, it’s possible that Helen’s cake making business will flourish, in which case she’ll also be subject to VAT on her sales. Best regards, John
Yes but vat is a tax on the consumer not the business. The business is the means of collecting the tax for the government.
Less the expenses to note.
A few things that were conveniently or unfortunately left out during this video. Business Asset disposal relief is a lifetime relief, meaning you can make use of the reduce rate up to £1m once in your lifetime. If you sell multiple business for more than £1m, you do not get to reuse this relief once you have used up your first £1m allowance.
Secondly, the reason why CGT is ‘washed out on death’ is because your estate on death will be potentially liable to inheritance tax. To avoid double taxation, the government has been so kind as to forgive any CGT on death, although the estate of the deceased will be liable to IHT, which for the most part will be significantly higher than any rate of CGT.
CGT relief on death made sense when it was introduced in 1971 as Estate Duty was all encompassing. However, since 1992 (1995 for AIM shares) business property has enjoyed 100% relief from taxation, meaning that shares in an unlisted company are not subject to Inheritance Tax.
As a consequence, CGT relief no longer makes sense.
I found it crazy, that there's no talk anywhere about making government, smaller, what you can't make smaller at least more efficient and streamlined rather than finding ways to tax more here and there. We shoud be looking to tax everyone, the rich and the poor less so there's more investment and freedom and ultimately, growth.
It’s insane isn’t it. I mean just look at how everyone went for the £20 billion hole in the budget. You’re telling me a government that spends £1 trillion a year can’t find ways to make up for 2% deficit in its budget? Anddd, the thing that really is insane is that the government has increased tax on everyone due to fiscal drag. They’ve been taxing more and more every year due to fiscal drag. Where is all the money going?
@@yesmariooWith a Tory government of 14 years and you’re asking where the money went🤦🏻♂️
Very interesting discussion as always. I love it when you get Dan on. It'll be interesting to see if Rachel Reeves implements a sensible policy like you're suggesting, or if the politics gets in the way.
The only reason for "uplift on death" that I can think of is that it is often very hard to work out the original purchase price of an asset after someone has died (unless they kept very good records). I don't know if there's a good way to deal with those situations.
Good point, I suppose a nasty way to do it would be to assume 100% gain. Then if they want to avoid some of the tax, they can sort it out for you before they die.
@@mapmuncher5587 This is what they do in Estonia. I think it's a reasonable alternative to the current inheritance and gift tax.
Personally., I'm worried about having a sudden hit on the rental property I own. Should I sell up now or not? Having had the property since new in the early 90's I will extremely angry if the investment is suddenly hit with an increase in CGT after holding it all these years. Please consider a video on this specifically, as there must be a million people like me.
Press speculation seems to suggest Reeves will align CGT on shares with CGT on property taking both to 24%.
Leave cap gains tax - understand how the economy works
How can a failed mortgage clerk know about running the countries finance's when she helped her last employer go bust allegedly
good videos, but how about making a series on how to boost efficiency on equal (or enhanced) public services etc, so tax can go down INSTEAD of perpetually seeking ways to increase tax e.g. by making it "fairer"
Don't get the example someone pays no tax when they die. IHT? also that's 40% not 10, 18, 20, 24%. We need a fair tax system to pay for transparent services that are accountable with service level agreements. All should pay not just some. (above a minimum limit). This channel seems to have a sole purpose to push more taxes. Not really a fiscal study agenda more a tax more think tank.
They never discuss risk and that we rely on people to take risks with businesses but also investments. Also if someone makes a savvy investment and coups a great return within 2 or 3 years then they should be rewarded for that, whereas talking the headline rate to 45%, even with a relief for inflation is still way too much of a disincentive. I'd rather hoard my money tbh or even move abroad. These people are academics at heart and will never understand what it takes to take huge risk or create real economic value.
You have also already been taxed on any money you invest so then CGT taxes you AGAIN on the amount you yield on your investment. So you're being taxed twice on the same money. To take that up to 45% (even w/indexation relief) is scandalous. Yes some people convert their income to capital in a business but why should the rest of us suffer just to deal with people who are doing that?
Risk is a choice. Risk is inherent in anything you do, so why would they need to reiterate the self evident.
How are you taxed again on investment gains you just made? The capital gain is taxed, not the principal.
You seem confused.
@@cfalvl2380I wish tax was a choice
@@cfalvl2380 no I'm sorry but the risk in going to work to earn an hourly wage is in no way comparable to that of investing in assets or businesses. You can't go to work and lose money but you can invest and lose money. So why on God's earth would you make the tax rate the same as income tax? Plus you've already been taxed on that money you've invested. I can't believe people can't see how insane this proposal is. As mentioned, I would (and will) entirely change my strategy if that comes in and will invest far less, or indeed move
@@cfalvl2380lots of people that have clearly never made an investment here. You pay income tax and Nat insurance tax on your earnings. Then u pay mortgage and living costs and that tiny bit u have left over after, u invest that. Then you pay capital gains on any profits. So you’re getting taxed twice. A 40% income tax payer would be paying up to 80% in tax if they raise capital gains to 40%. When you invest you have no guarantee you will ever see a return on your investment. So why would people invest? Anyone with investments realises this and will withdraw the bare minimum while labour are in power. Because reform will definitely pledge to reverse them if they get in. And likely conservatives would do the same. Labour will end up with less money.
I dont agree wiht ';wow these people are very rich'. I am not rich, but I paid quite a bit in CGT last year due to the tax laws on crypto currency use. A lot of people in my community are very worries about the changes and are considering leaving the UK as a result.
Honestly, we should be discouraging cryptocurrency use, so I see no reason to have a lower rate of CGT on that.
Doesn't that depend on what you did to earn the money? If you only have a large CGT bill because your crypto gained value (without you doing any actual work) then what's the issue?
@@BonBonUKif their crypto lost all its value should the government reimburse them?
@@BonBonUK Whether gained through work or through sitting there, neither should deserve a lower tax rate than most people pay through income tax and national insurance.
@@elliotts4173 No, but that doesn't mean they shouldn't pay on the gain.
I remember Labour moaning that the conservatives after Brexit wanted to turn London into Singapore-on-Thames.
Well, yes, that would be awesome - we would love that please!
Editing of this is pretty bad, too many skips ??
All comes across as hating sole traders and small business owners who can actually create services rather than unpopular podcasts
There's no reason why a sole trader should pay a lower rate of tax than everyone else.
@@martineylesrisk
Sole traders do pay the same tax rate?
@@elliotts4173 If a sole trader earns through dividends or capital gains they pay a lower rate than everyone else who earns through income tax and national insurance.
Velda Brook
what clearly isn't "fair" is more wealthy hard-working people paying in a higher % of their income in tax (excluding those using elaborate legal tax avoidance schemes). governments around the world have become dependent on this normalised abhorent unfairness, then claim they're seeking "fairness" = bizarre
It's because wealthy people are more mobile which moves the Laffer Curve for that group to the left. It's just far easier to exploit working people and so that's what politicians do because that's often their only option. In my opinion if we want things to be fairer the best thing we can do is lower income tax, but obviously people don't like that either because they want their public services. I'm not sure there's any winning here.
"exploit" is accurate.
I don't think there's a good reason to have a lower rate for investments than for Labour. 14:13 "If it's just a normal return, don't tax it" This is precisely what we should tax!
Risk would be one
@@Rob_Davidson82 Honestly, they will still probably make a lot of profit even with tax rates similar to the staff they employ, so the lower tax rate is unnecessary. Also, the entrepreneur has just as much protection from risk as the poor worker, poor unemployed or poor child. If the welfare system is insufficient for the entrepreneur it is also insufficient for the whole of society.
@@martineyles You have absolutely no idea what you're talking about. It's people like you that are destroying the UK.
Taxes are going up
How about entrepreneurs, just move abroad and not do anything in the UK....
Then you wouldn't have a Tax problem at All....
Well apart from the Top 10% pay 60% of your Tax...
How about you have a smaller more efficient state, with lower taxes and higher growth
You could try running a business yourself and understanding there's no one with a fat pension, or sick pay or anything else supporting you, now you want to bombarded by HMRC too....
Best just leave the UK let it die out, without the 60% it needs to fund the 55% of the population that takes more from the Tax payer than they contribute
It's only getting worse. Earner over £100k and you won't get the child care you're paying for in tax, you're hit with a 62% stealth tax and your mortgage is already sky high, and I'm still in a 3 bed semi. God forbid I choose to live in the south east near the only city with work. Can't wait to leave and take my two young kids elsewhere
That person (top 10%) who pays 60% of tax has most likely profited (and in a significantly disproportionate manner) on the back of the people they employed and probably exploited (the other 55%). So it is not a simple case of higher tax payers subsiding or funding the other tax payers.
@@patoises you build a business and create jobs, then you'll see the risk taken and value added.
@@patoisesExploited? how does that work in Britian 2024? "Come work for meeeeee muahhahahaha"
@@CmdrTobs Here are some relevant statistics:
CEO-to-Worker Pay Ratio: In 2023, CEOs of S&P 500 companies made, on average, 268 times the median income of their employees. This disparity has grown steadily over the years; in 1965, the ratio was just 20-to-1
CEO Compensation Growth: From 1978 to 2023, CEO compensation has skyrocketed by 1,085%, while the typical worker’s compensation increased by only 24% over the same period.
Hong Kong is so rich and has zero capital gains tax.
I'll move over to the Chagos Islands; I understand Mauritius is a tax haven and a lot warmer. Of course, I'm joking about the point here the UK isn't worth remaining in.
Best Exit u.k and don't be a TAX slave!! Sort out your own mess.
They all seem to play down their individual earnings but I suspect that they are all quite wealthy. It would surprise me that none of them have invested in shares , stocks or property as they are, after all, finance/tax experts. If they are condoning an increase of CGT then they would be harming their own earnings. So, all I can conclude is that none of them have any assets that would be taxed in the way they are suggesting (or more importantly I suspect they have protected themselves against such rises).
Personally I agree that CGT needs rationalising and I am happy if CGT is increased to reflect income tax bands but it must be combined with an Indexation relief.
It's the exemption that they want, but I see little reason for it.
It's still too high relatively. I personally wouldn't have made half the investment decisions I have over the years had CGT been in line with income tax (even with indexation relief). I'd rather keep my money or move abroad frankly
@@RJAlmond1 Very selfish.
You can put 20k in an ISA and 60k in a pension every year. And pay no CGT on gains. This is how the 99% (includung wealthy IFS employees) buy and own assets outside their primary residence (also free of CGT).
If as a couple you can invest more than 160k a year then you damn well should be paying tax on those additional investments.
@@martineyles you don't understand risk do you. I'm not here to take risk for other people. I take risk, like any other investor, in the hope of a reasonable return. When you take away the promise of a reasonable return I will stop investing. How the hell is that selfish?
Don't care - we left last year. We cd see what was coming. We don't pay any cgt now.and have a 20% flat.tax rate. And we.love.our new location.
Then what is your incentive to comment? What is this location?
Portugal?
@@Pirake123 After a google Portugal has CGT, a flat 28% for individuals.
@@aidanbarber1524 Yes sorry I was being lazy. Could be any of these I suppose.
Armenia 20%
Estonia 20%
Georgia 20%
Guernsey 20%
Jersey 20%
😂 the bots and trolls are running at high levels for this video.
Looks like you guys hit a nerve.😂
I do like Helen's proposals.