Rich people, as you know, don’t pay tax. In fact the richer they are the less tax they pay.
Even poor folk with some accumulated savings have enjoyed generous tax breaks for ages. ISAs are the most popular way to build capital in a tax free wrapper and I am allowed to top up with up to £20,000 annually. I used to fund this by using the Capital Gains Tax allowance which was £12,300 in the 22/23 tax year. Now the allowance has reduced to £6,000 this year and crucially any excess, which was taken at a generous 20% rate, attracts tax at my marginal tax rate. That means it is added to my income.
Accordingly, I have sold the rump of my holding in Vodafone at a loss of almost £8,000 creating a CGT allowance this year of almost £14,000 – with one bound your hero is free, at least until the next tax year. Also my holdings in individual companies is reduced to just four: MP Evans, Haleon, Legal and General and Phoenix. If I may digress, although I told you last year why the name Haleon was chosen, it evokes bad breath to me; unfortunate as it is a purveyor of mouthwash. Also, after I bought Phoenix it promptly dropped by about 20% but is now recovering.
Personal Assets Trust, perennially super-cautious, well done Sebastian Lyon, hold just 25% in equities and do not see a move out of the bear market for some two years. He may cautiously add to the trust’s holdings in equities as conditions improve. He reminds me of an experienced sailor hauling in the sheets so as not to put his vessel at risk. He prefers to quote investor and writer, Morgan Housel.
”Happiness is the gap between expectations and reality, so the irony is that nothing is more pessimistic than someone full of optimism. They are bound to be disappointed.”
A sentiment perhaps inspired by Mr Micawber. I have just ordered Housel’s The Psychology of Money as some light Christmas reading.
I have saved until last the way to pay almost zero tax, by which I mean no income tax or CGT. Give money to charity and this is what the rich do. They retain enough for their requirements and give the rest away. My income is enough for my requirements but insufficient to be a meaningful donor.
I haven’t read his book, but I enjoy reading Morgan Housel’s writing each week via the Collaborative Fund weekly e-mail newsletter. Articles are also archived here: https://collabfund.com/blog/authors/morgan/
Almost always interesting and thought-provoking ideas.
As for charitable giving, “meaningful” is often best determined by the recipient, and I can think of at least one charity that would almost certainly deem your donations of time and treasure to be quite meaningful. Whatever the reasons behind our giving, as Morgan Housel sometimes points out, the act itself tends to make the giver happier . . . and often to do good in the world, as well.