Every law-abiding citizen is obliged to pay income tax. But let’s discuss the one-off wealth tax, which enjoys much support from the UK population. Moreover, almost 78% of the country’s population supports the increase of tax capital gains for those who own assets of more than 10,000,000 pounds.
Oxfam’s research has shown that wealth taxes have been significantly reduced recently. It has resulted in tens of billions. Of course, the richest have to pay capital gains tax, but they tend to pay much less because the forms of income they rely on are subject to lower rates. This article will focus on how the wealthy avoid paying high taxes.
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Income tax is the most significant expense you will ever have to pay. If you don’t want to avoid a financial crisis and keep your money working, you must find the best way to switch to a lower tax rate. The maximum income tax rate is 45%, so even a slight reduction will save you much money. At the moment, the tax system in the UK provides three types of taxes:
Unfortunately, wealthy people are often not the most law-abiding and good citizens when paying taxes. They often use a variety of ways to lower taxes that can save them a lot of money.
Nowadays, rich people use a variety of tax avoidance schemes to keep the maximum of their capital. If you have your own business and it makes a profit, it is worth paying corporation tax. The deductions will be made on any profit that you manage to get. Wealth taxes in this situation amount to 19-25%, depending on how much profit you manage to get.
In this situation, rich people use one of the available loopholes to reduce existing taxes. The thing is that employers’ pension contributions are defined as expenses they can make to pay less tax. In addition, there is no income or dividend tax on employer pension contributions. When making a pension contribution of £10,000, saving about £4,500 in tax liability will be possible.
The wealthiest pay depends mainly on how much tax they have to pay. At the moment, there are several different forms of income and wealth of the wealthiest people, which are often taxed at an undervalued rate:
At the same time, rich people still hide large sums of money from the tax service, leading to more acute poverty and inequality.
Tax justice in the UK is more complex. To correctly evade income and not be liable to the state, it is worth doing everything competently and by the current legislation. Most wealthy people hire financial advisors who have some knowledge of taxation. In general, the main task of these specialists is to make it possible for rich people to pay less tax. In particular, hiring a specialist makes it possible to accomplish the following tasks:
Even a small reduction in net wealth tax over time can result in huge savings, depending on the particular tax category. At the same time, consulting a financial professional does not mean abandoning your accountant’s and others’ services altogether. The advisor often works closely with the represented staff to determine the most effective way to reduce tax costs.
If you have sold a property or your investments, you will likely have to pay capital gains tax. It is worth noting that a British citizen has the right to receive a profit from the sale of property or investments not exceeding £12,300 without paying capital gains tax. It is called tax relief.
At the same time, if the amount of profit received exceeds £12,300, the average tax rate is from 10 to 20%, depending on the amount of profit from the sale. In addition, there are special marginal real estate tax rates, amounting to 18-28%.
Rich people in the presented situation can use different ways to reduce the amount of tax:
The effective ways to reduce taxes continue beyond there. Wealth tax commission provides many options for capital preservation, allowing you to increase your wealth.
The average person does not benefit, or only helps to a certain extent, from various forms of income and wealth. A fair share of tax revenues paid by average people is on income from work (in this situation, it means wage employment and self-employment), as well as services and goods. Rich people also pay personal income tax on their profits and consumption.
Statistics indicate that taxes paid by ordinary British citizens (personal income, wages, consumption) account for over 80% of the country’s total tax revenues. In addition, VAT has recently fallen disproportionately on the poorest segments of the population, as a significant portion of their income is spent on consumption.
To summarize, the rich often pay less tax in proportion to their wealth and income than the average person. As a result, this results in greater inequality, damaging the social contract. It means that billions that could be spent on investing in sectors that can break down inequality (medicine and health care, education, green energy transition and more) remain uncollected from rich people. It is worth changing, and action must be taken immediately.