Warnings: I am not a tax accountant, tax solicitor, or financial journalist. I am not a stockbroker. I am not an investing expert. I am not an expert in any field at all and am entirely unqualified to give any advice on anything. I agree with paying taxes, but I agree with reducing one’s tax burden. I am a swing voter. I’m not political.
First, a big thank you to everyone who read last fortnight’s blog, the compliments slightly outweighed the complaints, but not by much. To all the trolls, thank you, you were endlessly amusing, please keep them coming. The two highlights were being called a “Marxist Wanker” and a “Tory-loving bastard”. I will try to be more sensitive, even if it is entirely against my nature. Fingers crossed I will do better this week.
I’ll start with a little quote:
“In this world, nothing is certain except death and taxes.” Benjamin Franklin.
Holding onto your tax money for the taxman successfully can be a true source of misery for location scouts, location managers and other crew. These are the common issues:
- You spent it. I did it myself one year, I spent it at the Blackjack table (Thank you, Westcliff Casino), I don’t go to the casino anymore. This can cause terrible stress and anxiety for months, while you get threatening letters that quickly escalate in their aggressiveness from the HMRC.
- 2022 was a great year and you expected 2023 to be great as well, so you didn’t set it aside and then 2023 you earned poorly.
- You live hand to mouth, and you never had enough to pay it in the first place.
- You are badly organised, so you always pay more than you should because the bottom of your car eats expensive receipts.
- You got behind one year and now you are always behind.
These are endless reasons and I have done every single one. But today is a new day, you now set aside this money, no matter what. Perhaps a medical procedure would be the only exception. https://www.locationhq.co.uk/blog/how-much-does-a-location-scout-earn/ I have made some points here on what to set aside, that may be helpful for reference. You never dip your beak in that account again for the sake of your mental health and your happiness.
I thought this article was about Shaving thousands off your tax bill each year!
It is, but these are the basics before it gets juicier.
Disclaimer: If you are poorly organised and bad with money, do not attempt the below. Put it in a high-interest side account instead and make a note of the sort code and account number and shred that bank card.
I have successfully offset a percentage of my tax bill most years for over 10 years, not all of it but a double-digit percentage of it in my good years. How do I do this? I set the money aside and I invest it and I use these earnings to help pay the tax bill, therefore shaving thousands each year off my tax bill!
Doesn’t earning more money, mean I pay more tax? Not necessarily! Capital gains are tax-free up to £6,000. Annoyed when your income tax, tax-free limit is out, now you have a new way of getting money back in your pocket tax-free.
I have a limited company! That doesn’t work for me. Limited companies can have investment accounts. But careful not to go over the trading limit, but you do pay corporation tax on it, but that could be much lower than income tax if you leave it in the company account. Most investment platforms also cover companies.
Here are a few of my favourite platforms:
I’m a fan of exchange-traded funds ETFs, so these are my two favourites above, the charges are the lowest I have found. Many other platforms will sell you above and add their charges on top, go direct.
https://www.ii.co.uk The service is solid and it is one of the cheaper options, with a beautiful easy-to-use website.
https://www.nutmeg.com I’ve consistently done well here and is a good starting point. I have my risk set at 10 the maximum, so much of it is equities.
My advice would be to do it yourself and learn as you go. Learning is far more valuable than money in the long run.
Warning: There is an aptly named Investment book called “Where are the customers yachts?”. Read the small print, many charges are hidden. Expect the unexpected. If it is too good to be true it probably is.
https://youtu.be/wM6exo00T5I?si=5ge0FxAkQnv2DR5N Thank you “Wolf of Wall Street” This covers commissions and charges rather nicely.
Wealth advisors: Don’t bother. We don’t earn enough to justify it. The only thing they excel at is getting your money out of your pocket into theirs.
What to invest in? It is a big topic. I am 20% bonds, 60% equities, 10% Crypto, 10% commodities.
Warning: Crypto, I use https://www.coinbase.com/en-gb/ But Crypto investing is VERY high risk. Yes the HMRC does track it.
I don’t do individual companies; I go for ETFs (Exchange-traded funds) the charges are less and I prefer to have a whole index.
Lost? You should be. Some deeper dive help:
‘Financial Times Guide to Investing’ 2020 by Glen Arnold. It is longer than ‘Lord of the Rings’ sorry.
I’ve had bad years and good years and markets go up and they go down. I tend to average between 4-22% each year.
Warning: Past performance is not a reliable indicator of future results.
Case study: You are a Location Manager and not a limited company. You have earned 100k. You set aside 40k for the tax man. Let’s assume you invested well and you made 10% over 18 months. You made £6000. Tax? Nope, tax-free. Even as a limited company you’d pay 20% after expenses, that is still a win. Let’s assume the tax bill was 40k, that is 15% off your tax bill.
Warning: The value of your investment may go down as well as up, and you may get back less than you originally invested.
Credit card payments. Did you know you can pay your tax bill on your credit card? Hello Air-miles! https://www.locationhq.co.uk/blog/supervising-location-managers-location-scouts-location-managers-air-miles-for-free-travel/ or https://www.which.co.uk/money/credit-cards-and-loans/credit-cards/best-credit-card-deals/best-cash-back-credit-cards-akfnR0Q4GK6X#best-cashback-credit-card-deals a cash back credit card 2% off again. 15% off, plus the 2% that is a whopping 17%.
Warning: Credit cards. Pay your balance off in full each month by direct debit. If you are poorly organised and bad with credit, do not attempt the above.
The trickiest aspect is timing. The tax bill is due in January, really think ahead, the last thing you need is to be 10% down in December with the bill looming, cash out when the going is good. If it is company money for corporation tax the same goes. Get your tax dates in the diary.
Hopefully helpful, but please be careful. One final warning, given the risk of writing this:
Warning: I am not a tax accountant. A tax solicitor. A financial journalist. I am not a stockbroker. I am not an investing expert I am not an expert in any field at all and am entirely unqualified to give any advice on anything.
Good Luck out there!