Budget 2025
- Thread starter Beebo
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stowie
Well-Known Member
Loans are not interest free, but I imagine they are a level of interest we cannot access as mere mortals without billions in assets.
Billionaire gets loan from bank for lifestyle. Bank charges some interest. I assume interest gets paid via asset sales and taxed but this is far lower than asset sales to fund lifestyle (although I wouldn't be too surprised if Bank adds interest to original loan so nothing is paid back immediately). Loan get rolled over indefinitely by bank until billionaire dies when the loan is repaid from the assets and is useful for lowering estate taxes whilst also using the "step up rule" in the US to reprice said assets at time of owners death.
Bank is happy - they have a long term return with the interest on a very low risk loan (unless said billionaires fortune completely vanishes). Billionaire is happy because they pay tax on the much smaller amount of cash they need to service the debt than from the actual income value they enjoy.
It is called the "buy/borrow/die" strategy if you want to look it up. I think the US were looking at methods to close the loophole but this was in 2024 and Trump happening probably put the brakes on this.
stowie
Well-Known Member
This might be the one time I ever agree with @CXRAndy (although his use of language is unpleasant). I hope it doesn't trigger some kind of existential crisis for me.
Reeves clearly was floundering on the question about 3 years before MOT for new cars and I get the horrible suspicion that it was the first time she had thought about it.
Electric cars now pay VED at £195 (+£425 or something if it over £40k). So the whole paying for the roads argument seems a bit contrived. VED and fuel tax was a tax on efficiency and emissions but that has long since gone.
What I do know is that I will be nursing my middle-aged diesel for a lot longer before going Electric. It has £30 VED for life, no car payments and is surprisingly frugal on the fuel. For those EV owners with a drive and home charging, the cost model still works even with the pay per mile tax. For me in an urban area with no access to such, EV fuel costs were highly marginal at best since the public charging network pricing is insanely high. With the extra EV tax, it is simply uneconomic - an irony because urban environments are exactly where EVs should be most beneficial to improving air quality.
I assume at some stage, the ULEZ restrictions will move past Euro 6 and I will have to part with my car, but I think this a way away.
It is a plan with no great way of checking compliance outside the MOT test or government mandated black boxes in cars. I am very far from being against road pricing - it will happen at some stage but this scheme seems to penalise the least worst car options and be - at best - difficult to work.
icowden
Shaman
Again, don't go into Politics. Tax has increased on savings interest. Savings interest is not income tax, it's tax on savings.
The promise is kept.
icowden
Shaman
Yep. It's a brilliant plan to stop people switching to EVs. You are spot on.
Dorset Boy
Active Member
Honestly, it forms part of the assessment for income tax. It is the savings rate of Income Tax.
You really should go into politics twisting reality to fit semantics.
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Dorset Boy
Active Member
That would almost certainly fall foul of the UK and EU anti avoidance measures.
It may be an american thing, but I'm pretty confident it isn't a UK thing.
Which banks would be doing this lending - name some names.
Dorset Boy
Active Member
Meanwhile in Cambridge, a recruitment consultant is choking on his cornflakes as he discovers RfA won't make pensioners pay any Income Tax on the State Pension if it exceeds their Personal Allowance and is their only pension. (The full 'new' State Pension will exceed the Personal Allowance from April 2027.)
Another case of not thinking things through and a lack of comprehension on her part.
Some state pensions under the pre-2015 system can be £17k or £18k - will they be exempt?
What about older inherited State Pensions?
When she says 'their only pension', does she really mean that, or does she mean their only income?
Another case of not thinking things through and a lack of comprehension on her part.
Some state pensions under the pre-2015 system can be £17k or £18k - will they be exempt?
What about older inherited State Pensions?
When she says 'their only pension', does she really mean that, or does she mean their only income?
Pross
Senior Member
I think that's the point being made. If you freeze rates as a politician you would argue you haven't increased anything. The same if you increase rates of tax on savings you can still say 'we aren't increasing rates on income'. Semantics gives them plausible deniability on claims they broke manifesto pledges, that's politicians (of all varieties) for you.
BTW are you really trying to argue that the wealthiest in the country don't generally use legal avoidance methods to ensure they pay signficantly less tax than they would if taking all their income as PAYE?
PurplePenguin
Well-Known Member
I looked this up, but it relies on having an asset that has appreciated in value. It's not that easy to achieve such gains.
Dorset Boy
Active Member
No of course I'm not, but they will receive income from different sources which are taxed in different ways.
But so far, CR has only come up with dividends being taxed at a lower rate than income from employment, which ignores the reward for taking risk, and the fact the underlying investments (if holding shares) are also subject to Capital Gains tax), and Stowie has come up with a loanback scheme that almost certainly falls foul of the UK and EU anti Avoidance rules.
Maxing out pensions, drawing PCLs, maxing Isas, using investment bonds either onshore or offshore, using VCTs and EISs are all methods used by ordinary people.
You have a good idea what do for a living, and I don't hear anything other than rumours, usually from people who don't know. Holding investments in certain juridictions means no tax paid there, but you still have to pay tax if you repatriate the money.....
So what are these wonderful other ways that the rich avoid paying taxes? Genuinely i'm curious.
C R
Guru
Capital gains is also lower than income tax, and is only applied on sale. The trick of living off loans has also been mentioned. The reality is that if you have enough money to play those tricks, your effective tax rate is lower than if that income came through PAYE.
Dorset Boy
Active Member
I've hinted that the loans idea wouldn't work in the UK or EU, so don't try using that one.
You also don't seem to comprehend the reason different sources of income are taxed differently, something I have explained above.So what are these other schemes that are used by the mega rich living in the UK?
