Taxes you're likely to encounter and reasons for a £3.1 million net worth being considered 'affluent' as discussed on the This Money podcast
In Britain, a significant portion of household income is allocated to taxes, contributing to a centralized tax system with levies on both income and consumption. The UK income tax system is progressive, with rates ranging from 0% to 45%, plus National Insurance contributions that can reach up to 2% additional [3][4]. The main indirect tax, VAT, is set at 20% and is applied to most goods and services [1].
When considering the overall tax burden on labor income, the effective tax rate in the UK is approximately 38% for the average worker [2]. However, exact total taxes paid by an average household will depend on income and spending, generally including a substantial amount of direct income taxes, National Insurance, and indirect VAT, summing to roughly a third or more of household income.
The podcast "This is Money," published every Friday on This is Money and various podcast platforms, offers insights into the financial landscape. The latest episode covers topics such as Nationwide's cash bonuses, spending a lottery jackpot, Premium Bonds, Rachel Reeves' performance as Labour, the future of cash Isas, and retirement with a state pension [6]. The podcast can be downloaded from the App Store for iOS devices and the Google Play Store for Android devices, and it can also be listened to on the player above and on various podcast platforms [7].
In addition to discussing current financial topics, the article answers six burning questions about finances that people are currently asking financial advisers. These questions include inquiries about strategies to avoid inheritance tax on £100,000 [8].
The Government is considering introducing a wealth tax, and the decrease in capital gains tax take has implications for the Chancellor's plans [5]. Furthermore, households pay a variety of taxes, including air passenger duty and environmental levies on energy bills.
The strategy of giving £250 gifts to 400 people who then pay the money to the questioner's daughters is not specified as being currently legal or illegal. The article also discusses how much one needs to feel wealthy in different areas of Britain.
The latest episode and the archive of past episodes can be found on the This is Money podcast page, where readers can also join in the debate. The podcast can be subscribed to and reviewed on various podcast platforms.
References:
- https://www.gov.uk/vat-rates
- https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/taxes/bulletins/taxesandchargesontheproducerprice/april2021
- https://www.gov.uk/guidance/income-tax-rates-and-bands
- https://www.gov.uk/guidance/national-insurance-contributions-rates-and-thresholds
- https://www.gov.uk/government/news/stamp-duty-land-tax-receipts-reach-record-high-in-2020-to-2021
- https://www.thisismoney.co.uk/money/podcasts/article-9531119/This-Money-podcast-Episode-542-Nationwide-cash-bonuses-spending-lottery-jackpot-Premium-Bonds-Rachel-Reeves-performance-Labour.html
- https://www.thisismoney.co.uk/money/podcasts/
- https://www.thisismoney.co.uk/money/bills/article-9531119/This-Money-podcast-Episode-542-Nationwide-cash-bonuses-spending-lottery-jackpot-Premium-Bonds-Rachel-Reeves-performance-Labour.html
- The effective tax rate for an average worker in the UK is roughly 38%, comprising direct income taxes, National Insurance contributions, and indirect VAT, which together can amount to a third or more of household income.
- In addition to direct taxes and National Insurance, households in the UK pay various taxes such as air passenger duty and environmental levies on energy bills, ensuring that a significant portion of total tax revenue comes from various sources.
- For those interested in investing for retirement, the latest episode of the "This is Money" podcast covers topics such as the future of cash Isas and retirement with a state pension, providing insights into personal-finance matters and financial landscapes for businesses and individuals alike.
