In the UK, Capital Gains Tax (CGT) is generally not the same as Income Tax. Why not?

It's OK Norah. I know that people can build wealth - but it's not possible if a person has an average income and doesn't receive any legacies.

This isn't envy, by the way. My own children are about to receive substantial legacies and I don't begrudge them. I wouldn't trade in my own health and feeling of contentment for any money in the world (that's not to say I wouldn't mind having a bit more money - who wouldn't?)

Nevertheless, I am concerned about the increasing inequality in the UK (and other parts of the world). Not only is it unfair, but it's detrimental to societies (and a breeding ground for chancers like Reform).

growstuff

Funnily enough David you'd be surprised. I realise you suffer from inverted snobbery, but a university education hasn't stopped me from using my imagination and experience or having a very wide circle of friends and acquaintances. What my education has given me is an ability to be objective and to fight against being blinkered.

I know very well how small businesses work. My ex-husband ran one, as did my late father-in-law, although his small business became quite big. My ex-husband hasn't worked for decades, but has a property portfolio which provides an income. He doesn't "save" anything and certainly doesn't live frugally. My father-in-law got to the point where he didn't need to work either and his widow lived for years on the interest. Thinking about it, most of the people I would call friends run small businesses.

Then you do know how it all works so why try to deny it by posting nonsense about doing out of savings

David49

So you move the goalposts and talk about earned income instead of wealth.
One thing for sure if your horizons are being an employee on PAYE you're never going to be wealthy.

There's nothing wrong with being an employee, David. Tthe problem is when employees don't get anywhere near a reasonable share of the profits which their work is vital to. If all employees were to down tools tomorrow we'd soon see that they are as vital to the economy as the people who employ them.

Not everyone is an entrepreneur and they shouldn't be looked down on or paid a pittance that is impossible to comfortably live on while business owners make big profits and look for ways to minimise their taxes.

I'm not for a minute saying that all employers do this, but the fact that people have to be paid benefits by the state when they are actually employed and that more than 20% of the UK population lives in poverty, doesn't look too good, does it?

There is generally risk involved in capital gains income, if it's increased people will be less likely to invest and take risk which isn't good for the economy.

growstuff

It's OK Norah. I know that people can build wealth - but it's not possible if a person has an average income and doesn't receive any legacies.

This isn't envy, by the way. My own children are about to receive substantial legacies and I don't begrudge them. I wouldn't trade in my own health and feeling of contentment for any money in the world (that's not to say I wouldn't mind having a bit more money - who wouldn't?)

Nevertheless, I am concerned about the increasing inequality in the UK (and other parts of the world). Not only is it unfair, but it's detrimental to societies (and a breeding ground for chancers like Reform).

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

David49

So you move the goalposts and talk about earned income instead of wealth.
One thing for sure if your horizons are being an employee on PAYE you're never going to be wealthy.

Did you read the OP David49? I have a strong feeling you didn't. It was about two types of income. I know this because I wrote it!

Yes, the thread has expanded along the way but surely that isn't a problem unless someone is out to derail it and that isn't what has happened on this thread, or is it?

If you didnt understand/remember the OP that may explain the bitterness of your last sentence.

Moii

There is generally risk involved in capital gains income, if it's increased people will be less likely to invest and take risk which isn't good for the economy.

Not always.

If you buy a property and later resell it at a price which would trigger CGT because house prices have risen, where's the risk? There's only a risk if the property has been bought specifically in the expectation that property prices will rise and a profit can be made on selling. That's speculation not investment.

What sort of 'investment' that people are 'less likely 'to do are you thinking of? How many people actually invest in business start ups or shares put on the market to raise extra capital?

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

But growstuff demonstrated how this was not possible unless one earned a very high income. Which most people don't. The maths are against you...

Norah

growstuff

It's OK Norah. I know that people can build wealth - but it's not possible if a person has an average income and doesn't receive any legacies.

This isn't envy, by the way. My own children are about to receive substantial legacies and I don't begrudge them. I wouldn't trade in my own health and feeling of contentment for any money in the world (that's not to say I wouldn't mind having a bit more money - who wouldn't?)

Nevertheless, I am concerned about the increasing inequality in the UK (and other parts of the world). Not only is it unfair, but it's detrimental to societies (and a breeding ground for chancers like Reform).

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

Yes, I accept that. However, the income (or dividends) would have to be very high to have excess income which could be saved.

The main asset could be the business, which could go bankrupt or depreciate. Its full worth won't be realised until it's sold and even then there's not much point keeping the money in a current account. The money would need to be invested somehow or other.

In any case, building up a small business requires work. It's not just about saving and being frugal. As I quoted earlier, the average income (before deductions) in the UK is about £38k - and that means that half of all people earn less than £38k. It really is impossible for them to "save" enough to acquire enough to be in the top 1%, especially as the tax system overall is skewed against low and low middle earners.

David49

growstuff

Funnily enough David you'd be surprised. I realise you suffer from inverted snobbery, but a university education hasn't stopped me from using my imagination and experience or having a very wide circle of friends and acquaintances. What my education has given me is an ability to be objective and to fight against being blinkered.

I know very well how small businesses work. My ex-husband ran one, as did my late father-in-law, although his small business became quite big. My ex-husband hasn't worked for decades, but has a property portfolio which provides an income. He doesn't "save" anything and certainly doesn't live frugally. My father-in-law got to the point where he didn't need to work either and his widow lived for years on the interest. Thinking about it, most of the people I would call friends run small businesses.

Then you do know how it all works so why try to deny it by posting nonsense about doing out of savings

I'm beginning to feel I live in a parallel universe.

MaizieD

^Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.^

But growstuff demonstrated how this was not possible unless one earned a very high income. Which most people don't. The maths are against you...

growstuff's maths began with low numbers.

---IMO, 35 years has no basis in reality, 50-60 years is more logical.

The mean income for all workers in the UK in 2024 (before tax) was £38,224pa.

---Half of workers earn more, some earn much more. Many families have 2 workers. Adjust the maths, my premise has merit.

I really do not care how anyone makes their money as long as it is legal and the appropriate taxes are paid along the way.

I do however have a problem when it’s suggested that when one’s home is sold that it should be liable to CGT if it is sold for more than what you paid for it.

If anyone is fortunate enough to have saved their taxed income, by all means tax any interest paid on the capital sum (ISA’s exception) I just do not get the tax, tax tax mentality.

I am more interested in where and how local councils, county councils and government spend (squander) their funds.

GG13 I don't think anybody has suggested that one's own home should be liable to CGT.

Norah

MaizieD

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

But growstuff demonstrated how this was not possible unless one earned a very high income. Which most people don't. The maths are against you...

growstuff's maths began with low numbers.

---IMO, 35 years has no basis in reality, 50-60 years is more logical.

The mean income for all workers in the UK in 2024 (before tax) was £38,224pa.

---Half of workers earn more, some earn much more. Many families have 2 workers. Adjust the maths, my premise has merit.

No, Norah, I'm afraid we're not going to agree.

I chose 35 years as a random figure. If people have to wit until they're 80 after 50-60 years) to be wealthy, I would argue they're not going to see much benefit.

You really don't seem to understand how ordinary people on average incomes live. Families with two incomes have two people to feed, clothe, transport to work, etc. They're still not going to have enough excess money to save enough to put them in the top 1%.

growstuff

Norah

MaizieD

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

But growstuff demonstrated how this was not possible unless one earned a very high income. Which most people don't. The maths are against you...

growstuff's maths began with low numbers.

---IMO, 35 years has no basis in reality, 50-60 years is more logical.

The mean income for all workers in the UK in 2024 (before tax) was £38,224pa.

---Half of workers earn more, some earn much more. Many families have 2 workers. Adjust the maths, my premise has merit.

No, Norah, I'm afraid we're not going to agree.

I chose 35 years as a random figure. If people have to wit until they're 80 after 50-60 years) to be wealthy, I would argue they're not going to see much benefit.

You really don't seem to understand how ordinary people on average incomes live. Families with two incomes have two people to feed, clothe, transport to work, etc. They're still not going to have enough excess money to save enough to put them in the top 1%.

I agree, we disagree.

Did anyone say wealth after 70 was no benefit?

Of course families with 2 incomes have 2 workers to feed, clothe, transport. However, I believe 2 wouldn't work if total family income was not greater than with merely one working.

I really do not care how anyone makes their money as long as it is legal and the appropriate taxes are paid along the way.

But the contention raised in the OP is that the taxes aren't 'appropriate'. That taxation falls more heavily on those who are least able to avoid them because the tax system favours the wealthy.

growstuff

GG13 I don't think anybody has suggested that one's own home should be liable to CGT.

It has been suggested that income on increases price of one’s home is passive and therefore should be taxed.

GrannyGravy13

growstuff

GG13 I don't think anybody has suggested that one's own home should be liable to CGT.

It has been suggested that income on increases price of one’s home is passive and therefore should be taxed.

Who has suggested that? I must admit I haven't seen it.

Norah

growstuff

Norah

MaizieD

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

But growstuff demonstrated how this was not possible unless one earned a very high income. Which most people don't. The maths are against you...

growstuff's maths began with low numbers.

---IMO, 35 years has no basis in reality, 50-60 years is more logical.

The mean income for all workers in the UK in 2024 (before tax) was £38,224pa.

---Half of workers earn more, some earn much more. Many families have 2 workers. Adjust the maths, my premise has merit.

No, Norah, I'm afraid we're not going to agree.

I chose 35 years as a random figure. If people have to wit until they're 80 after 50-60 years) to be wealthy, I would argue they're not going to see much benefit.

You really don't seem to understand how ordinary people on average incomes live. Families with two incomes have two people to feed, clothe, transport to work, etc. They're still not going to have enough excess money to save enough to put them in the top 1%.

I agree, we disagree.

Did anyone say wealth after 70 was no benefit?

Of course families with 2 incomes have 2 workers to feed, clothe, transport. However, I believe 2 wouldn't work if total family income was not greater than with merely one working.

Two people on average incomes still wouldn't earn enough to accumulate £3.5 million even after 50-60 years. After mortgage/rent, taxes (including council tax), utilities, food, clothes, travel has been paid, there would be nowhere near enough to save towards a multi-million pot. Heaven forefend if they should actually want an occasional holiday or have children.

Do the maths Norah.

growstuff

Norah

growstuff

Norah

MaizieD

Wealth can easily be built without legacies, out of income. Many have successful profitable businesses started out excess income from working.

But growstuff demonstrated how this was not possible unless one earned a very high income. Which most people don't. The maths are against you...

growstuff's maths began with low numbers.

---IMO, 35 years has no basis in reality, 50-60 years is more logical.

The mean income for all workers in the UK in 2024 (before tax) was £38,224pa.

---Half of workers earn more, some earn much more. Many families have 2 workers. Adjust the maths, my premise has merit.

No, Norah, I'm afraid we're not going to agree.

I chose 35 years as a random figure. If people have to wit until they're 80 after 50-60 years) to be wealthy, I would argue they're not going to see much benefit.

You really don't seem to understand how ordinary people on average incomes live. Families with two incomes have two people to feed, clothe, transport to work, etc. They're still not going to have enough excess money to save enough to put them in the top 1%.

I agree, we disagree.

Did anyone say wealth after 70 was no benefit?

Of course families with 2 incomes have 2 workers to feed, clothe, transport. However, I believe 2 wouldn't work if total family income was not greater than with merely one working.

Two people on average incomes still wouldn't earn enough to accumulate £3.5 million even after 50-60 years. After mortgage/rent, taxes (including council tax), utilities, food, clothes, travel has been paid, there would be nowhere near enough to save towards a multi-million pot. Heaven forefend if they should actually want an occasional holiday or have children.

Do the maths Norah.

I have done the maths.

Heaven forefend they may earn above the average on which you base your maths. Nobody said these mythical people couldn't both earn above the low average. Earn a bit above average and save. Easy concept.

You can’t accumulate wealth above house and pension if you are an employee, even if you have a high salary, because a high salary usually means similar lifestyle. You have to invest in growth of some enterprise, it may be you own business it may be shares of another business, as that business expands your share expands with it. BUT, if that business is not successful the value of your share will fall, so all enterprises are a risk. Personally I chose to invest in my own business so that can control the risk and invest in opportunities as the arise.

Your own home is the obvious place to invest as a priority apart from Stamp Duty it’s largely untaxed, over the years your domestic property have been very safe investments

Trouble

The issue I have with CGT is that there is no allowance for inflation. No issue with gains above inflation being taxed at the same rate as income tax.

That is an excellent point.

growstuff

GG13 I don't think anybody has suggested that one's own home should be liable to CGT.

It feels like so much tax in this country, and the Labour government keeping finding "black holes", that iI personally wouldnt rule anything out. Anything at all.

Moii

There is generally risk involved in capital gains income, if it's increased people will be less likely to invest and take risk which isn't good for the economy.

Trouble is with CGT, it goes back decades.
Not sure of my point really.

fancythat

Trouble

The issue I have with CGT is that there is no allowance for inflation. No issue with gains above inflation being taxed at the same rate as income tax.

That is an excellent point.

Hang on.

You buy for £100,000, you sell for £150,000. You have a £3,000 allowance then you are taxed on the remaining gain of £47,00 at 18% (if a basic rate tax payer) . tax taken = £8,460

You're left with £42,540 of your 'gain'.

And you want inflation to be taken into account? 😱

What a joker...