How much do I actually earn?

[Anita Bush]

I am sure that someone out there will know where I can get the answer to this:

When I get my hard won basic and flying pay, it has tax and national insurance removed. If I assume that I am 'Joe Average' married with 2.4 kids, car etc; what proportion of, say, £1 in my pay packet do I actually get to keep and what proportion goes to central and local Government in Income Tax, NI, VAT, road tax, fuel duty, council tax etc etc.

I've tried to work it out but my brain hurts..... any ideas?

If I decide to save the remainder then I will pay tax on the interest on the money that I have already paid tax on..........but that is another question!!!

[Mad_Mark]

And, as I had never thought about until one of the guys at ISK pointed it out recently, on fuel they add tax at source (the majority of the cost of fuel) and THEN add VAT at the pump. So in actual fact they are taxing the tax :sad: :mad: :sad: :mad: :sad: :mad:

MadMark!!! :mad:

[Dangerman]

Here you go ... basically it is about 40%

Tax Freedom Day (http://www.adamsmith.org/tax/what-is-tfd.php)

Forget tax on the interest, don't get me started on the fact that if you save all that hard-earned after-tax money when you eventually die they will take 40% of it in Inheritance Tax too ......

[Anita Bush]

So what you are saying is that by charging VAT on the final price of fuel it is in HMGs interest if the prices are kept high?

Quelle Surprise!


I wonder if duty is paid on the quantity of fuel sold, ie by the litre, or by a percentage of the wholesale price (and a very big percentage it would be).

Interestingly enough a friend in the States says that farmers and trucking companies over there are starting to complain about the cost of gas going over the $2 a gallon mark!!! Protests to follow maybe?!!

[Dangerman]

Fuel duty is currently 47.1p per litre. Add VAT to that and you get a total of 55.3p per litre.

I'll get my anorak ......

[Anita Bush]

Dangerman

Thanks for that. For some reason I thought that it would be higher. I think that I will take my remaining 60p and go and buy a very small beer! Now how much of that will go to HMG? I'll think about it on my walk to the pub.:confused:

As for inheritance tax I have told my parents to spend my inheritance now and enjoy it. I will do the same. Sell the house, spend the dosh and die happy rather than have to come to terms with handing my house to HMG in order to pay for someone to wipe my @rse.
If ever the time comes that I cannot look after myself due to 'old age' then I will check out...thank you...goodnight!

[airborne_artist]

don't get me started on the fact that if you save all that hard-earned after-tax money when you eventually die they will take 40% of it in Inheritance Tax too ......

One of the few benefits in the tax system of being married is that there is no IHT on legacies to one's spouse. Doubtless Greedy Gordon will clamp down on that too ...

[Dangerman]

Ah yes, but you did say "If I assume that I am 'Joe Average' ..."!!

You personally may well be paying more than that, that figure is arrived at by simply dividing the total tax take by the population, which is a pretty simplistic approach to take. For someone on £50k I would hazard a guess that it would be more like 50%, rising to perhaps 60% for someone earning over £65k.

Ouch, now my brain hurts too!!

[Dangerman]

One of the few benefits in the tax system of being married is that there is no IHT on legacies to one's spouse. Doubtless Greedy Gordon will clamp down on that too ...

Actually that one comes with a bit of a health warning too; sometimes that is the worst thing to do!

At present you don't pay Inheritance Tax on the first £275k of an estate. Let's say that my wife and I own a house worth £500k and have £50k in the bank. If she dies and leaves her share to me there is no tax to pay; however, if I then die a week later and leave everything to the kids then they will have a tax bill of 40% on £550k less the £275k exemption, which is a tax bill of £110,000.

If, however, she leaves her half of the house to the kids when she dies and leaves the cash to me then there would still be no tax to pay on her death (the £250k half share in the house is less than the exemption). If I die a week later I am leaving my 50% of the house plus £50k cash to the kids, which totals £300k. Take off the exemption, and the tax bill on my death is 40% of £25k, or £10,000. Your kids are £100k better off, and the taxman gets £100k less.

As with any financial advice, you get what you pay for (so don't take any notice of free advice on here or any other websites, go and spend a bit of money on a decent solicitor or accountant!!), and the most important thing is NEVER give money or property to the kids if you are not 100% sure of your own future financial security (if, say, you fell out with them).

Oh, and one final thing. There is something called a "Deed of Family Variation" which, as long as ALL the beneficiaries to a will agree, means you can retrospectively change the will to make it more tax efficient. So, for example, in the situation above the kids and I can agree and "override" my wife's will after her death so that half the house gets left to them instead of to me. If you ever end up in a situation like this get GOOD advice QUICKLY!

[airborne_artist]

Dangerman

Been there, done that, with my late father's will/estate which was so very badly drafted by a solicitor that we've since done pretty much what you've described.

The way the rules are currently written does make IHT pretty much a voluntary tax. The action we have taken has, entirely legally, saved >£100,000 ....

[Deneb]

Hang on guys, that can't be right.

If a surviving spouse dies within a short time, the estate does not suffer a second dose of IHT in so short a period.

it is called double taxation relief.

[ImageGear]

I prefer the relatively uncorruptable theory of taxation proposed some years ago.

No income tax, no VAT, no purchase tax, no council tax, etc. levied on any individual whatsoever.

Audit all the banks and make them take a percentage of every transaction passing through. This would permit the removal of the entire treasury, the inland revenue, the VAT recovery infrastructure, and several other tiers of government. Not to mention the returns and other tedious personal admin.

It would also require that every official transaction, (Input: ie payroll, interest, etc.), and every output: withdrawals, credit cards, cheques, transfers, etc would pass through the system and a flat rate of tax creamed off.

This would mean that the creative accounting and "avoidance" currently taking place would be largely irrelevant. Even if people tried to keep cash under the bed, sooner or later they would want to spend it and hey ho the circle is complete.

It was estimated that setting the rate at 3% of every banking transaction and the savings in bureaucracy would more than meet the needs of the country in terms of health, defense, education, etc.

Problem is what would we do with all the bean counters.

Imagegear

[Dangerman]

If a surviving spouse dies within a short time, the estate does not suffer a second dose of IHT in so short a period.

it is called double taxation relief.

Well, actually what you are talking about is called quick succession relief, double taxation relief is an international taxation concept!

What I was trying to do was give a simple example to make people more aware of one of the inheritance tax pitfalls which catches out a lot of people. Same reason I didn't bother mentioning business property relief, agricultural property relief, domicile etc., etc..

But in any case surely it is not applicable to the inter-spouse transfer in my example, only to chargeable transfers on which IHT has already been paid?

[buoy15]

Dangerman

Petrol, like whisky, is taxed when it is produced by the company

When it is "bottled" and distributed., Duty is applied.

When you put it into your tank or your tummy, you pay VAT on it with money you've earned and already paid tax on !!

ie. equals 4 x stealth tax

You'll find that fuel duty is about 78%, hence the valid argument from the Hauliers and fuel protesters

The Americans are now protesting about petrol increases from 80 cents to 170 cents (90p) a gallon over the last year, whislt driving around in V12 - 7 litre, gas guzzlers.

Greedy Gordon tried to make the Scottish whisky companies re-lable with a "product stamp" which was dutiable, at great expense to themselves.

Another one of his devious 73 stealth taxes he tried to introduce since becoming the "prudent Chancellor"

God forbid he becomes Prime Minister

I suppose when you are driven to work in a chauffer driven, never queue for petrol or in a supermarket, and can't tell Jeremy Paxman what the present price of a litre of petrol is, your either out of touch, or you've got it made.

There again, you could be an absolute Nob

[mutleyfour]

Hmm Just heard that Tony now wants to implement a "Journey Tax"....what next "sleep Tax"?

[Cambridge Crash]

Image Gear

The Italian Government has a system of skimming cash holdings in banks when the coffers are low (no doubt to pay for another Burlesconi mis-deed). The result is that Banks are about the last place any sane person would keep his/her money; indeed this is why the grey and black economy, especially in Mezzo Giorno (southern Italy) is so large - this leads to a vicious cycle of a loss of tax revenue, etc. This is also illustrative of the emerging economies of Eastern Europe, and especially in BiH.

Nice idea, but it doesn't work!

[Scud-U-Like]

It's worth remembering that income tax represents only a quarter of all UK taxation. The rest has to be found from those other sources we're so good at complaining about (VAT, IHT, National Insurance, fuel duty et al).

Incidentally, taxes pay our (the armed forces') wages, which you might like to bear in mind, next time you're tempted to bleat about how much of your income (or inheritance) ends up with the Revenue.

[mutleyfour]

Incidentally, taxes pay our (the armed forces') wages, which you might like to bear in mind, next time you're tempted to bleat about how much of your income (or inheritance) ends up with the Revenue.

I dont think any of us didnt realise that little Gem Scud...but it also pays the 40 year old chap who has a wife and 4 children none of which has ever worked a day in their lives. Then we have to employ unskilled labour from foreign countries because we havent the workforce in this one. That doesnt make sense...

[Paul Wilson]

Dangerman, the figures for VAT on fuel are worse than you think.

Take 90p per litre as the retail price, the fuel duty is 47.1p. However according to the Customs and Excise website "VAT is payable on these amounts sat PART of the RETAIL PRICE" (my caps). What that means is you pay VAT on the full retail price.

76.6p is retail before VAT, therefore the Govt. gets 47.1+13.4p = 60.5p per litre in tax from each litre bringing the price you pay to the oil companies to under 30p per litre. Before tax we have the cheapest fuel in Europe

[engineer(retard)]

I'm with Muttley, BBC1 election review yesterday stated that the social security bill was larger than the tax take. As for the indirect taxes, I dislike the tinkering with them to raise taxes and would rather that the government were honest and raised direct tax. At least we would know how much we are handing over, NI is a joke and should be combined with income tax.

[Scud-U-Like]

mutleyfour

Apologies if I came over as patronising, but some of us working in the public sector do tend to get tunnel vision regarding taxation (ie only looking from the giving, rather than the receiving end).

Your indolent 40-year old represents a very small minority of the population. The beauty (for want of a better word) of our taxation system is that, even those who are not working are paying taxes in one form or another.

[teeteringhead]

I've tried to work it out but my brain hurts..... any ideas? Well for a start you could read your P60, which will tell you (albeit for the last year):

a. How much you were paid.

b. How much tax you paid.

c. How much NIC you paid.


... er, that's it really.... or if you wanted a continuous answer, tot up the figures from pay slips as they arrive!

[Pontius Navigator]

teeteringhead, I don't think you actually read the question and you certainly didn't read all the other replies.

Ultimately you do not of course really get to keep anything it is all converted into goods. At every turn there is a tax take. Even VAT free items, like newspapers, have a tax slice of corporation tax, employer's NI contributions, employees' tax, and even VAT and NI on what the employee earns and spends.

I guess the short answer is that ALL your money, less the cost of material bought in from outside the UK, like Kenyan Beans or your overseas holiday, finishes up in the treasury.

The money for the Kenyan beans finishes up in their treasury, a swiss bank account, or back in UK for goods they buy.

[teeteringhead]

My apologies - always read the question first!! I was distracted by having a P60 in front of me..... which was scary enough. The original question is a very difficult one to answer, as so much accrues to Mr B @No 11. But not all PN, I suppose you would have to allow for the amount your wealth in terms of goods and property had increased (less the amount a future Chancellor would take from your heirs).

Reminds me of a Budget Day remark made by Robin Day many years ago, in anticipation of a so-called "giveaway" budget.

RD: "All this talk of the Chancellor "giving back" so many millions is of course rubbish. What may happen, on very rare occasions, is that a Chancellor may decide to take less!"

[DaveyBoy]

The 40% figure on the website quoted by Dangerman is a percentage of GDP, so includes everyone in the country be they employed, on benefits, seeking asylum, etc.

For someone who, like the majority of aircrew, is in the higher rate tax band, the last figure I heard quoted (sorry, can't remember when... few months ago, Radio 2, probably Jeremy Vine) is that on average, over 70% of your gross income eventually ends up in the treasury's coffers one way or the other.

Sounds a lot at first but it's quite plausible... consider how much you actually get to see in your wallet after your own income tax, NI, council tax etc has been taken out. Say, for example, you spent all that on beer (may even be a reasonable scenario). After the VAT and Excise Duty that goes straight to the treasury, some of the cost of each pint will go towards the salary of the lovely lass who pulls it, and some of that will then go to the government as her income tax, etc.

So one way of looking at it is that you only get to "keep" 30p of your hard-earned pound.

Dave