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VeryMeanReversion

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Everything posted by VeryMeanReversion

  1. Oh good, another chance for me to post http://moneyweek.com/merryns-blog/the-truth-about-tax-credits/ One parent working for 24 hours a week on £7 an hour Two parents each working 35 hours a week on £7 an hour Number of children 0 2 3 5 0 2 3 5 Gross pay £8,700 £8,700 £8,700 £8,700 £25,382 £25,382 £25,382 £25,382 Take-home pay after NI £8,623 £8,623 £8,623 £8,623 £23,434 £23,434 £23,434 £23,434 Tax credits £0 £9,114.06 £11,930.10 £17,458.86 £0 £3,023.82 £5,805.42 £11,368.62 Council Tax help £492.19 £432.91 £685.33 £753.38 £0 £0 £0 £0 Housing Benefit £6,706.26 £6,472.35 £6,950.00 £7,831.89 £0 £795.98 £1,249.16 £2,155.52 Child Benefit £0 £1,788.80 £2,501.20 £3,926.00 £0 £1,788.80 £2,501.20 £3,926.00 Total benefits £7,198.45 £17,813.12 £22,067.63 £29,970.13 £0 £5,608.60 £9,555.78 £17,450.14 Total net income £15,821.45 £26,436.12 £30,690.53 £38,593.13 £23,434.00 £29,042.60 £32,989.78 £40,884.14 Equivalent pre-tax income £18,750.00 £34,500.00 £40,500.00 £54,000.00 £25,382 £33,600 £39,500 £51,000 This doesn't even include extras for autistic children. Benefits lady has two. I have one child diagnosed with Aspergers. Not interested in being sociable but doing very well at school. I could be claiming ~£3000 per year tax-free but refuse to do so. Therefore you can add least another £4K onto the figures above for equivalent pre-tax income. I manage a team of design engineers, all the best ones seem to have more severe Aspergers than my son. As far as I can see, its "I don't give a **** what you think/feel, I'm doing what I'm interested in" syndrome.
  2. At the £50K boundary with 3 kids (25% effective tax rate for child benefit withdrawal) and a student loan (9% effective tax), someone would only need to give up ~30p to get that £1.13 in SIPP. The advantage over an ISA can be extreme is such case. In my case, the wife and kids would probably spend the 40p anyway so my marginal tax is 100%!!! May as well stash away the £1.13 for later.
  3. I've just looked it up, found that I'm a 5%er (pre-SIPP), 10%er (post-SIPP) rather than a 1%er. I seem to have an equivalent gross income to a single person working 24 hours a week at minimum wage with ~4 kids (http://moneyweek.com/merryns-blog/the-truth-about-tax-credits/). With a part-time spouse (NMW), overall household income is pretty typical around here. I am arbing the tax rates as you say as the difference is huge due to the trends in income to NI taxation (see pic) and the recent child benefit £50K limit. Best guess for my retirement income will be £20K SIPP, £15K state (incl. spouse), and £7K tax-free from rent-a-room (outbuilding). That will be plenty and I won't get near the 40% tax rate. As you say, a basic rate tax-payer makes a SIPP less sensible. You get some tax-free income (£4500 assuming £7500 pension and £12K tax-free band) plus the 25% lump sum but have to be careful to avoid excessive charges. I believe there are millions paying 40% income tax (effectively 50-75% due to NI, child benefit and student loans) that can reduce this to 10-15% in their retirement if they actually bothered to work it all out. So the only thing atypical about me is that I've worked out the sums and I'm prepared to give up income now for 3x later.
  4. Please explain, I don't understand what you are saying. I find SIPPs with salary sacrifice is a fantastic tax avoidance scheme. My effective marginal tax rate is ~65% but a SIPP reduces this to 10-15%. Frugal Git has it spot-on as far I as can see. It is very close to my plan.
  5. I'm waiting for my SIPP provider to offer P2P. I keep ~30% of my pension in cash at the moment, looking for something better than 0% return.
  6. Rule 1 around here. Don't report your neighbours. Everybody is breaking the rules. It's a large private estate with a history of two fingers up to the planners. (50% of new building done without permission).
  7. My farmer neighbour doesn't seem to have any trouble hiring Lithuanians. I saw 10 cars there a few weeks ago so that is 10-20 living in caravans, hidden out of side behind the storage barns. I believe planning permission allows seasonal workers to stay in caravans but funnily enough, they are there all year (complete farm is under glass so crop grows all year) I've checked and none are listed for council tax. I hate to think how much is being paid out in tax credits and child benefit for children outside the UK. One female worker had a baby a couple of years ago then became entitled to a council provided flat in the nearby town.
  8. I assume the reason is blame avoidance i.e. NIMBYs get upset by building anything => Blame targeted at local politicians. Money is borrowed to pay housing benefit so no-one notices (yet). The BTL'rs love it. The tenants get "free" housing. Printing money seems to have no downsides (yet)
  9. I prefer to think of it like a game of monopoly. - Your labour is you going round and round in circles to pick up the £200. (note : no pay rises) - All properties were bought up and developed before you even started. There is no permission to create any more. More development means higher prices. - Your spend your life paying rent - The winners are the bank (who creates all the money) and those that started first. The only difference between £ and monopoly money is that you have to pay your taxes with £. So how do you win? 1. Buy property from desperate sellers when things are relatively cheap (I've done this twice but it involves a lot patience) 2. Bend the rules in the planning game. Find the loopholes and be prepared to build without permission. 3. Position yourself to pay as little tax as possible (salary sacrifice SIPP then use the many tax-free income possibilities e.g. ISA, rent-a-room, 5K divis, 1K savings etc.)
  10. A savings rate of 5% isn't going to pay for much of a future income. More and more people are having to be responsible for their own savings rather than their employers doing it for them (DB pension). Wages are not sufficient to cover education, house and pension in a lifetime. This situation can't last forever. How long, no idea. It just looks like more and more promises (debt) are being made than can never be fulfilled. I worked out my savings to income ratio needed to be at least 50% for a decent retirement since I have no DB pension. I've managed to do 65% for the last few years and am looking to increase it to 70%.
  11. (figures approximate and no accounting for inflation) Bought 1997 - £190K STR 2003 - £380K Rented 2003-2010. Savings interest net paid rent so no housing costs for 7 years. Bought 2010 - £330K (similar house to above). Didn't need a mortgage but took one to spend £150K on improvements. Zoopla - £650K but probably £600K at best. Moving/legal costs ~ £20K => Overall gain approx (£80K-£190K) + (£600K-480K) -£20K = £290K (tax-free) I wouldn't STR again as net interest would not come close to the cost of a decent rental. Current plan is to use tax-free lump-sum from SIPP in a few years to finish converting a barn/outbuilding for the kids/relatives to live in or general rental if no-one wants it. Timing a nominal HPC is very difficult, maybe it happens so rarely we may not catch it during our working lifetimes. With transaction costs being so high, it's not like the opportunity in the early 90's. Brexit is still the best chance for a nominal HPC, interest rates rises and benefits eliminated for non-citizens. Many will simply not be able to live here without well paid jobs.
  12. Have you considered reducing your caffeine intake Although it looks like a currency collapse, I think it is the great yield rush mixed with debt stupor for the consumer zombies. Personally, I'm aiming for the asset approach.
  13. I've got an outbuilding in the garden that I can convert to 1200sqft single-storey. According to that chart, I could get 5 bedrooms and 6 people in there. I was thinking it was going to be a bit small for my two kids to share until they bought their own place. Now they can take in 4 lodgers and aspire to be landlord scum.
  14. For less than that budget in 2010 (including extension costs), I ended up with a 2100sqft house, 2/3rds acre plot with an outbuilding suitable for conversion into a separate 1200sqft house, quiet private estate and farmland views but good access to main roads. Lovely village close to Cambridge. When I go into the city (rarely), I wonder what sort of person is daft enough to buy there. By the time I'm done with the outbuilding, I will have spent around £550K and the kids get their own house in the garden so no BTL landlord to pay. Beating £200/sqft around here has been very difficult since 2003 but I managed ~£167/sqft. That's not far off the price per sqft I paid for my first place in 1997.
  15. Unless it secured debt, it's just a load of promises. Remind me, how much is an MP's promise worth ?? Looking at it that way, there is hardly any real debt at all
  16. I find it interesting how little time each minister stays in charge. It's clearly not in their interest to actually develop a long-term policy. With a 1-2 year average term, the only policy seems to be "avoid blame, get another job asap".
  17. After my education via that BoE paper, I was wondering the same thing as your example this morning. Do you know when they changed from the fractional reserve method to the "the borrower made me to it" method? For the last few years, I have been minimising consumption and using my £ to tax-efficiently buy assets. I want real stuff for my labour, not bank-created promises that evaporate over time. No more "Show me the money", it's "Show me the real stuff".
  18. I used to think that but that's not how it works. Only the central bank gets to create money out of nothing. The commercial banks use deposits to make loans, that money gets spent but the it comes back into someone else's account, that then gets loaned out to someone else etc. So the original deposit can effectively be used over and over again.
  19. It teaches you the rules of the game. (member since 2003 - owned since 2010)
  20. Is that all, my kids can come up with more reasons than that for not doing their homework.
  21. Income tax deferral e.g. 40% to effectively 15% if you later become are 20% tax payer and take the tax-free quarter National Insurance avoidance e.g. 12+2% Benefit maximisation e.g. keep child benefit if sacrifice to <£50K. Worth 17% for two kids, more for more.....
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