Stealth Taxes And Steps To Mitigate Them

Transcript

Unknown Speaker  0:01  

The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.

Christian Rodwell  0:20  

Welcome to Episode 183 of wealth talk. My name is Christian Rodwell, the membership director of wealth builders. And I'm joined today by my side by Mr. Kevin Whelan.

Unknown Speaker  0:28  

Hi, Chris, good to be with you again. And we've got a bit of a rant going on today. And we

Christian Rodwell  0:33  

we have yet that lovely topic of tax, and some stealth taxes, things that perhaps people might not be aware of, or certainly would like to try and mitigate, if possible.

Unknown Speaker  0:46  

We'll look, governments are always going to try and change things. And of course, the biggest and easiest target are those who are poorly represented, which get to know who they are, Chris, I'd love to know, here the entrepreneurs of this world is of course because employees are well protected. You know, we're kind of quite well unionised in the UK. So you know, there's there's a lot of unions going on. Yeah. And having said that, though, there are some countries that also mega union in the UK, more than UK, UK is about 25%. Okay, of the employees are unionised and you know how much power there is there. Just see what was been going on recently with the strikes. Yeah. Right. Could you get more union and that? I don't know.

Christian Rodwell  1:31  

Is it possible? Are there other countries with more unique instantly?

Unknown Speaker  1:33  

Yet the absolutely awkward.

Christian Rodwell  1:37  

I wonder if our listeners couldn't couldn't guess who they are?

Unknown Speaker  1:39  

Oh, do you think there might be I think I asked you to get shy. About the direction. Yeah, you know, you need to go colder, right? You need to go cold.

Christian Rodwell  1:49  

Okay, right. Are we talking more close to home Scandinavia, Scandinavian

Unknown Speaker  1:54  

countries. They're the big ones. So and the biggest of all, Chris 98% of the employees are members of unions. Iceland, cold, very cold, other cold countries. Obviously Sweden, Norway, Finland, Denmark, or kind of two thirds unionised, so don't get as many things going on there. But because the entrepreneurs are not unionised not well represented. They become a very soft target for anything when the government gets into a little bit of a black hole, and they want to raise money. Often they do it surreptitiously. They do it to entrepreneurs, specifically, I mentioned some of those. How about the big one they've done when they reduce the amount of entrepreneurs relief? Right. So entrepreneurs relief is us harder and business owners when we sell our businesses sell shares in our companies, we were able only a few years ago to make 10 million pounds and only pay tax at 10%. Right? That's a nice. Yeah. So you get paid for your hard work. And then you get a discount on the tax from normal capital gains to only 10%. They reduce that in one fell swoop from 10 million to 1 million. That's massive. Didn't get a no in the press. Nothing at all about that. What else did they do? What about all that shenanigans that went on with landlords? Right? You're a landlord. So you know you, you pay something on those mortgages, which costs you money, because you're leveraging yourself. So you should be able to offset that against tax bill. We used to let you do that. And now we're not gonna let you do that anymore. Section 24. Everybody knows about that. It's a rental property. Well, I assume unless you've lived under, you know, under a rock you haven't. But of course, you know, still some people don't know about those changes. But they've dropped the capital gains tax allowances still further. Used to be 12,000 Just over 12 grand 12 grand for you 12 grand for your spouse on other things that you could make as a tax free gain. Now it's six. Guess what's happening. Lots of landlords selling their properties, getting rid of things getting worried about capital gains tax, so many challenges and, and troubles ahead for people with property. And that's just the tip of the iceberg. I mean, the top of the iceberg inheritance tax. Wow, the huge amount of money they make inheritance tax every year. You published an article last week I did I ranted about it then I rant about it again. Because I don't know if you know this quiz, but inheritance tax pretty much is a voluntary tax. In other words, if you do a bit of planning, you don't have to pay it and I'm sure War. There's nobody out there who says, You know what, I love the taxman and my debt to society more than I love my children, I'm just gonna pay it. No, they don't. They just don't have a plan. And because they don't have a plan, and they fear, the thinking about death, it's not really a, somebody's a friendly subject is it's a bit taboo a bit like, suppose, having conversations about money, which we're going to keep pushing on that agenda for kids, and talking about our own death is often just not discussed. And consequently, I was talking to somebody the other day, and they said, the one of the family members had died. And they were leaving some property. And he thought that was great. That, you know, the people got the property as a surprise. And I said, I couldn't disagree with you more. Why would you want family members to pay inheritance tax and get a surprise, when in fact, if you plan that you could have brought them into the dialogue, taught them about property, show them different ways they can reduce their taxes, let them see how much you were thinking about them while you were alive. Rather than just surprising them, you know, when the will is red, and all of a sudden Nico was a nice guy, but now we've got problem. So most people, when they receive money, without any guidance, it becomes a problem because they don't know how to handle it. And when people go through transitions, like that all sorts of transitions in life, people get problems when they move from one place to another. Another big one, I won't talk about that, specifically, but all of the changes the government make around pensions, pensions, one of my favourite subjects to do well, but most people do it badly. Here's another stealth tax for pensions. I've told you about this before Chris 20 billion pounds. Right. You remember what that is? Right?

Christian Rodwell  7:04  

Yeah. Last pension money?

Unknown Speaker  7:06  

Yeah, it's not lost. Right? Let's get clear. The money isn't lost, it's there. But because the insurance industry, and the government can't work together, to be able to say, hey, here's a pension. It's linked to a national insurance number. Let's use the National Insurance database to match against the person who's pensioners and then send them the money back. No, don't do that. Because they want to keep

Christian Rodwell  7:33  

the money. Is it because they can't or they don't want to? Well, we

Unknown Speaker  7:37  

know they can, you know, technology will allow us to do that. But they don't do that. So 20 billion pounds floating around in the ether. Oh, another one. How about all the fines you see? Right? So an all the banks are fined for misleading customers not doing what's right by customers but misleading customers misleading, misleading all of the time. What do you think those fines go? You know, now, they go straight to the exchequer, which means, instead of reinvesting that money into, let's say, education, for people who fall foul of scams and other things, or for investing in some way to support the victims of that, nope. Once the FCA is had its money, it's got to cover its costs, right, almost like a quango. It's just, it's not quite a quango. But it's an organisation that just lives on, on the fees, it charges, then every penny beyond those charges goes straight to the Treasury. Right. So they're always always in a black hole, trying to find more ways to clawback money, or to and stealthy means you kind of don't really tell anybody the implication of it. So pushing the state pension back. That's just going to essentially mean people don't get the money earlier. So it's not a tax, but you're just not getting the money. So it's kind of if it reduces your lifestyle, shall we just call it a tax. If it reduces your quality of life, then it's draining money out of your life or giving you money you're entitled to you paid money, most people paid money, 3540 years, and they're entitled to stay pension, then all of a sudden, it gets pushed back to life today. We've seen the government do that with women's pensions, and the millions and millions of pounds in compensation that are being paid to women who you know, advised inappropriately or just didn't get the right amount of money. Lifetime allowance. Right the less case you know, you you used to be able to earn for saving Well, building a great retirement nest egg not that I like the concept of nest eggs. A reason why I don't like nest eggs, Chris is thinking about transitions. Again. You know, I mentioned that earlier on when people go through a transition or was causing them a problem if they're ill prepared for it. You imagine you go through your life, saving, saving, saving, building Money in Your Pocket, building money in your pocket, then you get to retirement age. Now you've got your nest egg. How are you going to live? When you don't know, annuities are all gone? Pretty much because the rates are slow. They're getting better. So they are coming back a little bit. But most people have this flexible pension called drawdown, which means they've got all these choices. But when you've got to deal with, how much income do you need, how much cash do you need? What's inflation? What's the risk and stock market? Now? What's the timing of that risk? If you imagine you're retired, and the stock market crashes, you're almost never going to recover. You got to work out your longevity, you got to work out how much you want to leave your kids, all of those things, suddenly, you've got to be a manager of money. When all you've been before as a saviour of money. So you save save, save, you got your eggs, now you start cracking eggs to live, you know, people gonna move into scarcity. So I think there's a real need, particularly around the pensions issue to help people understand what they need to think about. So that they can plan and do things really, really well. And minimise the taxes that they can pay. minimise the taxes they pay on inheritance, there's so many different ways you can do that. You might want to ask me about that. And so many different ways that if you can tune in, to what's going on, so the tuning out, and most people tune out. And as a result, the stealthy things, get them. And when you compound those things, it's a tough life. You know, compounding, stealthy tax on tax on tax on tax, you know how it is with a cost of living crisis and all of those things. I'm just skimming the surface still, Chris. So maybe you need to give me a pause. And then you have a question or two, me?

Christian Rodwell  11:59  

Yeah, I mean, that's why we say one of anything is risky. And if people are just relying on that pension, then that's a risky place to be in, there are seven pillars and we advocate building income across as many pillars as possible to give you that peace of mind that security in the long term.

Unknown Speaker  12:14  

Nothing wrong with pensions, by the way that one of the most efficient things you can do. Because when when Stealth is there, to remove income from you, you need to find ways to reclaim that money wherever you can. So if you can get the government to pay you, instead of you paying after tax, that's a good thing. So I'm a big fan of pensions. But I just don't think the current pension system is geared up well, to help people use it well, which is why we specialise so much in the concept of the SAS of the small self administered scheme. tiny proportion of the overall population have SAS has or investing the time and understanding them. Why because the language bit grey, the language is a bit dreary. They don't know enough about them. And as a result, they don't use them but you can minimise mitigate obviate lifetime allowance tax, by spreading that money amongst numbers of people in the family. So instead of having it was 1.8, now it's just over a million. You know, if you've got a husband, wife, or three grown up, kids, you've got 5 million you can use. And in some cases, you can make the contribution of up to a half a million in one year, and get the corporation tax back or corporation tax going up again. Yeah, 25 P in the pound. So anything you can do to get your company to pay for something you would otherwise pay is good day. So I would say anyone who's called him to company, choir about what a SAS is, anybody who's gone to him to company, if they've got a family to protect, they should look at something called relevant life, which allows them to pay for live cover with the company paying the contribution, and therefore it's tax deductible. Which means if you think about it means the premium is cheaper because the government is contributing towards it. If you've got if you're an employee, you don't have a limited company should look at something called salary sacrifice. Was that mean? Well, it means instead of just having the normal amount of money that goes into your workplace pension, if you can afford to, and you want to build your wealth, not that pensions are the only way to build wealth. You've told us that already. But But what you can do is you can set your employer, hey, I know as an employer, you have to pay into the pension I do as well. But because I'm paid a wage, you're also paying employers National Insurance thinks about 13 something percent 13 14%. So can be a significant sum. If I asked you not to pay me that salary, or that proportion of salary, and instead redirect that into my pension, so I've got a growing font of money. Will you pay the National Insurance contributions that you would have paid I now don't have to pay into my pension so that I can get extra money. That doesn't cost you any more than it did before. That's called salary sacrifice smart. Many people do that. Not many. Have you got a shit employer? You could say, could we share it? You keep seven, I keep seven. Yeah, you could do that. So there's lots and lots of ways that people can do something, or they tend not the other two now are the donor where to go to to get the right information. And I'd say getting that means joining communities, you know, if you're into property, join people who into property, there's lots and lots of property experts in the world, tax experts in the world of property. You know, we know those and we'll signpost those from time to time. If you're into wealth building, join a wealth building community, if you're into any thing that relates to your specific professional if you're a contractor, join a contracting group. If you're a tutor, join a tutors group. There's always unique and specialised ways that people know how you can claim some money back instead of always being the victim, the victim, the victim.

Christian Rodwell  16:12  

And you mentioned earlier about inheritance tax some of the ways to minimise that.

Unknown Speaker  16:16  

Yeah, well pensions, the obvious one, because pensions are free from inheritance tax. Okay. So if you can find ways to build your pension pot up in the event of your death, always free of inheritance tax. It's not a bad thing. EISs right. Enterprise investment schemes, right, but more complex, probably need some guidance on him. Have a Google of that, that allows you to save inheritance tax making gifts, allows you to save inheritance tax, making a will. And just making sure you've done your will your powers of attorney, start to talk to people about how to use trusts. Because if you use a trust, sounds complicated, but it's not. It's you're parking some money somewhere with some rules. If you can learn a little bit about that you don't have to be an expert on a podcast, but you could talk to someone and say, what are the ways I could put some of my money or some of my assets into a trust. And because I do that, then the trust keeps the asset, something happens to me, so I don't pay inheritance tax. So it's a combination of a plan, some tax advice, some legal advice, some financial advice, combine those things, you'll save a whole lot more money than any advisor could possibly charge. And that's all you need to do. So I'm a great fan of getting advice. As long as you can prove to yourself, the cost of the advice is more than covered by the work that they do. Which is why we give a risk free guarantee to people who work with wealth builders, don't we give them 60 days to work with us? And if it's not working for getting all the money, but do we ever argue about that quiz?

Christian Rodwell  18:03  

No, no, no, we

Unknown Speaker  18:05  

don't we give refunds. We don't mind doing that. Because it means we're always on test. And I like to be on test. Because the only outcome is to make people more money, or to save them some more tax or to help them create a better legacy for the next generation. So stealth taxes, you know, watch out for him. And they're continually coming, Chris, there's probably more of them than then I mentioned. But there's a few. And hopefully, for the purposes of today, get people to start tuning into different communities, as well as the wealth builders community, to see if there are some people who've got some specialist initial knowledge that could help them minimise the impact of stealthy ways that come in to deprive them of their rightful money.

Christian Rodwell  18:52  

Ya know, really good conversation. Kevin, thank you for the tips there. And a lot of what we're talking about today is wrapped up in step three of our recurring revenue roadmap, we call that the roof, which is protecting you and your assets. So pensions, insurance and other elements there. We did a podcast way back in episode eight on the roof, so that anyone will find out a little bit more about this, then perhaps go and check out that episode. We'll link to it in the show. Show Notes for today.

Unknown Speaker  19:21  

Well, I mentioned a couple of things on the roof. Chris, we know, I've touched on a few of those. The roof is is a way to think about orchestrating how you own things is mostly about what you already own. And how you can make sure you do that in the right way. touched on pensions, but so many people have got the normal pension, but either they lost it and forgotten about it which we touched on, but also by not nominating the beneficiary, which means usually in a pension. If something happens to you, then There's some rules, the scheme sets the rules, right to trust or pensions or trusts and the trusts set the rule. And if you don't know what you're doing, in other words, you don't nominate a beneficiary, then the trustee, insurance company employer makes the decision about that, and they have to pay the money out. And if they pay the money out, then there could be future taxes to pay. Whereas things like SAS, or you know, where you can bring your children in, then they can operate the trust. So even if you're gone, the money doesn't have to come out of the trust, so it stays tax free. And that's one way. Another thing to be aware of is, how do you own your home? If you're a married couple? Do you own your home as joint tenants or tenants in common? Oh,

Christian Rodwell  20:48  

we're giving away all the juicy nuggets today.

Unknown Speaker  20:52  

The number of people I meet and obviously I've talked to a lot of people and say, how do you own your home joint tenancy or tenancy in common? They go? Oh, I think it's that. Okay. Yeah. And the consequence, of course of both are entirely different, whether it's a home you live in or whether it's a home that you have is some form of rental income. So most people own their property as joint tenants and tenants. So they get confused with the language, but it means they own it equally. Sounds reasonable, doesn't it? Yeah. Got a house. I live in it with my wife. Sounds reasonable. We should own equally. may not? may not. Because let's kill Kev off. Mrs. W. owns the whole house outright. Okay. What if she remarried some smooth talking, you know, fella from around the corner, and then deprive my children have their rightful asset. And that's one thing. Don't want to do that. It's not really good plan. What if Kev goes? Mrs. W? All of a sudden? goes a bit do Lally. Right, she loses a mental capacity needs to go into care. What is she got? A nice home? Yep. That's potentially assessed for care costs. How about a simple document cost no more than 100 quid to do and that change all of that called tenancy in common? Again, sounds a bit weird, doesn't it tenants non tenants we own is what it's called tenancy in common. Now, instead of owning the whole asset, you own a share. The asset could be 5050, could be 9010. Could be whatever it was 5050 for the first one. So that's how I own my home. Okay, tenants in common. So let's say then I own it 50% We kill Kev often might kill him off again. My 50% goes into a trust fund. Okay, my wife can live in the property, she can move, she can do what she wants, but she don't own the stock half. So while I can't stop her from marrying the new feller and parting company with her half share my house, she has always protected. But she went to Lolly in the previous thing. So she goes to Lally again. Now, of course, she doesn't own a whole home, she owns half a home can't be valued for care costs. So therefore, cannot be taken into consideration. Okay. Now, what about properties you own the buy to let say, Well, if you've got a differential tax position, you got somebody earning 40% Or even additional, right, somebody on basically zero, right? You can switch that around. You can say, I own 10%. My wife owns 90%. And you can like a slider. Yeah, you slide it one way or the other. So you go 9010 Alright, then. So now whoever's got the 10 earns 10% of the income and pays tax and 10%. The other owns 90%. And you can swap that around. So there's so many different ways you can use the roof and the lessons we teach in the roof to be able to reduce the impact of these stealthy taxes that catch the unaware. Yeah,

Christian Rodwell  24:17  

we can help people who are listening and perhaps have some more questions, but could call have a chat with us?

Unknown Speaker  24:23  

Yeah, absolutely. Because there's always things you can do. And, you know, we try and keep ourselves well versed in these things to help people and you can listen to the podcast, and that will give you a kind of a random walk through different things. You could see an article that I write and that might give you a random walk. But if you've got a serious intention to reduce the impact of style taxes, or reduce the impact of inheritance tax, or to build a better retirement, then I would say just give us a call. Because we can help pretty much anybody pay less, do a better job. Leave a better legacy. Yeah,

Christian Rodwell  25:05  

we all have slots available every week. 15 minute discovery calls with our team. Easy to book that in head to wealth builders.co.uk forward slash discovery call. Start there.

Unknown Speaker  25:16  

Yeah. No reviews this because

Christian Rodwell  25:19  

we have I was holding it back. Yeah. So if you've been listening today, you've enjoyed today's podcast, share it with a friend. And Sanjeev has been enjoying the podcasts as well. And he left us a review on Trustpilot, which I'll read out now. So it's really enjoying this podcast series, I really resonate with the insights summarised by Kevin and the episode feature in which she claps in which was becoming a property CEO. And the purpose of business is not just to make profits and earn a living, but to create recurring cash flow in a business that can work with you. And then to use those profits to fuel the life that you want, but also to build assets that produce recurring income streams. And he goes on to say, that's why I'm on this journey, being mentored by Kevin and tapping into the wealth builders, education, and community of experts and enthusiasts to move to financial freedom through to financial abundance and legacy. Great work. Thank you.

Unknown Speaker  26:18  

Wow, what an incredible review. Now one of the things to say about, Sanjeev for example, is incredibly smart man. But what I like about him more than anything else, is humility. In other words, when people are humble, when they say, I don't know everything, I know a lot about my area of expertise, but don't know everything. And when they open their mind, and they're willing to receive that, rather than many men that I meet, especially successful men can perfect the chest and say, I know a lot. And, of course, they don't know everything. Nobody, I don't know everything. I'm not professing to know everything. I would say for the purposes of the podcast. I'm a kind of a financial GP, really. And I know how to call on specialists, which is why I know so much crap about pretty much most things, you know, but I couldn't give anybody a diagnosis of everything. I will call in an expert. And we kind of call that within wealth builders, Chris, the wealth hub. That means we're a hub of excellent people, we curate the best people who know the most. And when we need to call on them, we call on them. But we can call on a favour or to call me because we can have we've seen that before. So we don't have to go to the expert, because we've seen it. And that way we can save our own members bit of money, save a bit of time. But also by being humble, you can always ask the question. Sanjeev has done. So him and his family. Brilliant at that. So open minded. So just a quick shout out to Andrew to say thank you for that. That was very nice with you.

Christian Rodwell  28:00  

It was Thank you indeed. So I think we've wrapped up all of our self taxes for today. It could be some more next time. I'm sure they're always coming up who was coming out of the woodwork. So we'll catch up Same time, same place next week. Kevin

Unknown Speaker  28:15  

Okay, Chris, and until then my friend See ya.

Unknown Speaker  28:21  

We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create, build and protect your wealth. Head over to wealth builders.co.uk/membership right now for free access. That's wealth builders.co.uk/membershipf