How risk averse are you?

chucknorris

grey_gym_sock wrote: »

i come to this from the perspective of noting that i've paid substantial amounts of tax when i've been earning a lot (which is fine), but much less when i have income from investments. which seems odd. (though i note that i have no BTL, unlike you - and BTL seems to be treated (increasingly) less favourably compared to investment in shares - at least, once you have more properties than can be covered by partial PPR exemptions, flipping PPRs, etc.)

Me too, not only have I nearly always been a higher rate tax payer (only my pension contributions keep me out of that awful 60% marginal tax band), but also when I came out of early retirement 6 years ago, it meant that all of my employment income was/is subject to 40% tax, and on top of that of course there is NI.

I'll be selling most of my properties and re-investing the equity mostly in shares, in only 1 to 4 years. I've now more or less decided that when my current tenants vacate, I will not re-let the property, for a number of reasons:

1. I've had enough of being a landlord after over 25 years.
2. I need to start spending the equity.
3. Dividend income receives better tax treatment.
4. CGT can be mitigated more easily with shares.
5. Dividend income doesn't have to incur UK tax if you don't live there.

BananaRepublic

Glen_Clark wrote: »

Something savers have been putting up with for years with interest rates below the real rate of inflation.
But when you tax capital gains less than earned income its another incentive to invest in existing assets (like BTL) instead of starting a business to create new assets (making things we can sell abroad to pay off Osborne's debts)
Hence the rocketing National Debt and my worries about Sterling cash as a store of wealth.

I doubt that the ability to make a gain from an asset has stopped anyone from starting a business. In fact many people who run small business also have BTL properties. BTL is a common way to build up a pension. A friend has two properties which will have no mortgage in 10 years, at which point he will retire and in part live off the rental income.

The great problem with taxation is that the effects are often far from obvious, and the wealthy will always have a way to escape the tax. Hence the tax office tends to hit the easy targets. IR 35 was introduced to stop small businesses paying most of their profits in dividends. I used to work on short contracts, taking job insecurity in exchange for a higher income. Unfortunately IR35 means that the rewards are not worth it, so I no longer do that. The companies I worked for found it very hard to get staff, and I suspect IR 35 was part of the reason. Why exchange job insecurity for a modest pay rise when a short period without work will wipe out the increased income?

There are indeed many foreigners who keep assets here due to the modest taxes who would leave if taxation was higher. Ireland attracts businesses by having relatively low corporation tax.

One of the big problems is surely companies such as Amazon who use iffy methods to avoid paying a lot of tax, by for example paying a huge sum to a company for the use of a logo, with that company in a low tax region. Thus a UK book seller might pay substantially more tax, and hence this is unfair competition. And we've seen how Sir Philip Greed managed to avoid tax, and in effect asset strip a company, all perfectly legally it would seem.

Incidentally I am in favour of removing mortgage interest relief for BTL. I simply cannot see why someone should have such a huge handout from the government. But it should be done gradually so as not to cause undue pain.