4 ms·

> They might pay less percentage wise than me and you Isn't income tax higher for those that earn more?

• gambiting 6y ago
  Usually, yes, if you are paid like a normal employee. I'm jumping straight to the point that many people have an issue with - that once you're wealthy enough, you don't make most of your money through a salary, you make it through capital gains, dividends, and other financial tools that make your effective tax rate much lower than it would have been had you taken it as a salary. In a huge oversimplification, let's say you're in UK and make £100k/year. If you take that as salary, you'll pay 20% tax on around £40k of it, then 40% tax on £50k, with the remaining £10k being tax free. On the other hand, if you open a limited company that makes £100k, well, you're only paying 10% corporation tax on any profits - but of course the way to play this game is to expense everything imaginable under the sun, so ideally you have close to zero profit at the end of the tax year. Yes, the money isn't "yours", it belongs to the company, but you can expense things like your rent, gas, electricity, "work meals" etc. Then take £10k salary from your own company which is within the tax-free allowance. Voila, in the eyes of someone external, you've made £100k but through "clever tricks" paid less than 10% tax on all of it. Of course most people don't realize that isn't not that simple, but things like this lead to very quick judgement.