What's something you feel like you would wish everyone knew about their own income tax?

I okay, there's another misconception that I hear a lot, and people panic because they think they hear about these um thresholds, you know, 20% of your basic rate, 40% or 45%.

And I genuinely get so many questions saying, I don't want to earn over £50,000 because if I do, I'm gonna have to pay 40% tax.

And it's like, no, we have a progressive tax system, which means that over the £50,270 pounds, you'll pay 40%.

Under that, it's still 20%.

So you should still be striving to, you know, increase your income.

It is progressive, but there are so many people that just, they just don't have the financial knowledge.

And it's not their fault.

It's the fact that it's nothing's discussed in schools.

And I think that this is, I think that's, you know, it's really, really bad.

I feel like people are, you know, thrown into the working world after university or if they don't go to university straight from school and they have no idea what to do.

They've never been told what to do.

I mean, that also extends to like mortgages and all these sorts of things.

But I just feel like there should be an emphasis on financial education in schools.

And I I don't understand why there isn't.

Yeah, you make such a good point.

Like I I saw um Claire Barrett do like a video about this recently.

Um we're actually gonna remake it because it it it clearly hasn't, you know, one video doesn't reach everybody, right?

So it's just like, how do we re-peat this drum?

Because I get this question too.

It's like, I don't want to go over the 50k.

I'm like, what are you on about?

Yeah.

Like, you know, it's if you're 51,000, you're only gonna get taxed on that, you know, 800 odd quid at that 40% rate.

Um and it's just it's like filling up the cup.

Yeah.

And once you hit the certain levels, you're then with it, everything within those levels are then subject to that form of tax.

Yeah.

And so I think that's like really important.

But you're totally right.

Like that is that exercise, one video like that, and everyone would go, got it for life.

Yeah.

And it would just be a simple, you know, that you could do that in 60 seconds with people in school and it would change.

Oh, 100%.

But then on the back of that, I also, I'm sure you've heard about the 60% tax trap, where essentially if you go over a hundred thousand pounds, your personal allowance, which is £12,570, gets reduced by one pound for every two pounds that you earn.

Yeah.

If that makes sense.

So when you get to one 125,000 pounds, your personal allowance is gone.

Okay.

Now there's a lot of videos online, you know, kind of almost scaring people into saying, oh my gosh, if you earn over 100,000 pounds, you will fall into the 60% tax trap.

And it's like, actually, no, your personal allowance is decreasing, but you're still only paying 40% of tax.

So again, people need to know.

I I feel like it just needs to be like a formal education of exactly how everything works because otherwise, people hear things online all the time and they're like, oh my gosh, actually, I don't want to be paying 60% tax if no one else is paying 60% tax.

So yeah, I I think that there are some amazing people who are really striving to get this into schools, which is amazing.

And I just think that's so much more important than like Pythagoras's theorem.

And I loved math at school, but I just feel like there's, you know, you you we need to like equip our kids for life.

Yeah, totally.

Yeah.

I've been like seeing a lot more people like move into like homeschooling as well.

Yeah.

Just simply because they're just like, they're not getting anything out of this.

100%.

You know, it really rammed it home for me.

I watched Adolescence recently.

I'm sure everybody's seen it.

Have you seen it?

I watched part of it, but with young kids, I I found it a bit too nerve-wracking for the future.

But I totally understand.

Yeah.

Because it it it really does ramp it home.

Like, um, you know, my partner, uh, her sister has kids of that age, and you see exactly the same like way that they uh interact with the world like that, and those school systems, and it just it took me back, and I was like, yeah, it was actually just like an absolute like mind.

School was just nuts, right?

Like, and we just walked out of there, and I'm actually to this day, there's only a small part of that.

I would say probably use about 10% of my education.

Nuts.

How how can we turn that to 90%?

I know and financial education for me is like the largest part of that.

And following up on from that, obviously income tax, which we just discussed, pay slips.

Yeah.

Big one.

Because people get paid and they don't understand.

They don't even look.

They just look at the number at the bottom.

Yeah, exactly.

And actually, that's one of the things they don't understand because they'll look at the number at the bottom.

Let's say they earn £24,000, let's say, just to make the numbers easy, um, they'll expect to get £2,000 a month.

And uh, they're looking at their payslip because their bank account is not showing £2,000.

And they're like, why what is gross pay?

What's net pay?

Why aren't they the same?

What's been taken out?

I don't want to pay national insurance.

Like, I've not signed up for this.

You know, they don't understand that this is what everyone has to pay.

National insurance comes out of your gross pay tax, your pension contributions, like there are so many things that people don't know about.

And the tax code at the which is normally at the bottom of your pay slip, you know, you need to be on top of that because HMRC, people always blame HMRC for getting these things wrong.

But at the end of the day, if you have, let's say you have a side side income and you only declare it kind of the following year after the tax year end, HMRC aren't going to know that you've got this side income.

So it your tax your pacelet will most likely be wrong because the HMRC don't know that information yet.

So it's it's up to you.

And I think that if the burden is on the taxpayer, they need to be given the education to know what they're looking for in the first place.

Totally.

And that tax code as well can be so many different like variations.

Exactly.

And just understanding what that is is really important.

Like majority of people should be on the 1257L tax code.

Yeah.

And if you're not, that means your personal allowance is either increased or reduced.

Normally reduced.

Normally reduced.

Yeah.

Um, and then when you join a company, often you're put on emergency tax because your tax code hasn't been submitted yet.

Yeah.

And so you're getting whack of tax, but then it will balance out over time.

That's what something's crucial here.

HMRC does do a good job of eventually pulling you back to sort of normal levels, right?

Or what what what normal is for you.

Yes.

Is there anything else that uh they should be aware of on their pay slip, like to look out for and it and question as well if there's like something on there?

So another thing that is on the pay, which is on most people's payslips, are pension contributions.

And it's really important to know how these can actually really benefit you and reduce your tax.

Because if you pay into a pension, you have a 60,000 pound allowance every year, and that can reduce your tax because the money that's put into your pension is essentially taken out of your income and you won't pay tax on that.

You will have to pay the tax when you eventually draw down on your pension.

But if you're tax efficient, you can you can minimize that.

I mean, I'm not going to go into all the figures, but you can minimize that.

But the fact is, you can reduce your income now.

And that's a really good tax um efficient way of saving money and also preparing for the future because a lot of people don't know, you know, not don't know, just don't realize and aren't thinking about the future.

And you need to, because you don't want to be stuck.

You don't want to be stuck in a, you know, you should be enjoying your retirement and not panicking about not having any money.

It's so tough to make people like do that because they're like, oh, I want to live for the now and I'd like more money now.

Yeah.

XYZ, but it you you make a great point because it's it's on your gross pay and you're getting the tax relief on that money as well.

Yeah.

So it's like it's becomes a no-brainer.

And it's also interesting when people like say it get £105,000 salary, they'll bring that down to keep their personal by using what's called a salary sacrifice.

Yeah.

Is that something you have seen quite a bit lot of people do?

So salary sacrifice into their pension?

Oh, absolutely.

And it's it's not just that, it's also to if people are trying to bring their um their income down into the basic rate.

Oh, interesting.

Oh, yeah, absolutely.

I I feel like you've there are so many ways to be tax efficient and it's really not complicated.

That's the main part.

It's really, really not complicated.

And there's so much information online.

Um, and it is, yeah, it's just important, it's just really important to just stay informed and yeah, try and work it out for yourself as well.

Try and think about things that you need in life.

So, for example, even like cars, and think about how you can work that into reducing your income or you know, doing salary sacrifice schemes for a car or something like that.

There are so many different things that you can do.

Yes.

So um there's like um, you know, the the ride to work scheme as well, you get your the tax back on your bike.

Yeah.

And my other half got uh something sent around, I think it was like octopus energy or something like that, where you can get the electric car um for cheaper, it comes out of your pay, don't pay the tax on it.

Yeah.

So it's like really great way of like being tax efficient with purchases as well through your work scheme, which is really and another thing to keep note of is also working from home.

So many people are working from home nowadays, and you can claim that back.

Uh when I say claim it back, you can claim it as an allowable expense, which therefore is slightly in a different way, but it will be reducing your income, your taxable income.

And it's it's yeah, it's really good.

That's such a good chart, actually.

Yeah.

I remember doing that as well because it like in COVID, they were like, Well, how often we work at the moment.

Yeah.

It's like a reduction of your household bills, isn't it?

Because you're paying that because you're it's a proportion.

Either either you can do it's a six pound like flat fee, flat rate per week, if you don't want to kind of calculate it.

If you want to calculate it, you can you can deduct part of your utilities, your internet, your Wi-Fi, like the proportion of your um home that is used for work.

So if you have a, I don't know, a study or an office um and it takes up 10% of your house, you can then um you can then claim back 10% of your utilities.

I mean, it could be so efficient.

You know, even on the six pounds, it's a couple hundred quid.

Yeah.

But it's worth it.

Oh, absolutely.

Flights to Barcelona sort of.

Do you know what I mean?

It's completely yeah, however, you want to reuse that money.

I I got a tax rebate through this morning.

I was like, Amazing.

Yeah, you know, and I always do the same thing.

Like, and I get this tax rebate, 33% goes to investments, 33% to savings, and I spend 33%.

Yeah.

And do the same every time I get any sort of windfill of money.

And it's just a nice way of like, you know, future me, you know, short term me, and I'd like some new trainers, please.

You know, that's like you have to enjoy, you have to enjoy your money now as well.

Yeah.

Yeah, it's so, so important.

Now, the personal allowances we've spoken about a little bit here as well, and the thresholds, they haven't really changed much in recent years.

And that's something called fiscal drag.

Yes.

Which you might see in the news, and you might be like, that's one of those personal finance terminologies which sounds really bloody complicated.

How on earth do I work that out?

But what does it actually mean?

So, in basic terms, it is essentially your pay, so your salary is increasing in line with inflation, but your but the tax thresholds are not moving.

So, therefore, even though your salary is increasing, you are being taxed more and more.

More of your money is falling into that tax bracket.

And so you're not necessarily better off.

And it's a real shame.

I really thought that in the October budget, maybe wishful thinking, but I really thought they were going to make some kind of increase.

And there has actually been um some petitions going around to try and increase this.

And there's talks it might be increased to 20%.

Sorry, not 20%, £20,000.

The personal allowance.

The personal allowance.

Interesting.

Yeah.

I saw one petition going around trying to get it to 45,000.

Now there's talks about it potentially going to 20,000.

But it could, I just think people need to be helped.

They do.

They do.

And it's a really fast way of helping people, isn't it?

This like immediately can be done.

Obviously, you know, it impacts the income that HMRC receive, and of course, then government spending, etc.

But we're not going to get into that today because that's another conversation entirely.

Um, but it would make such a big difference.

Even the, you know, an extra seven and a half grand a year is massive.

Yeah.

Um, you know, that's food shops covered, so that's energy rising costs, energy costs covered.

I really do think that's a quick win for a Labour government that's potentially struggling a touch right now.

Well, they're saying that reform, that was the first thing reform were gonna do.

Um, which obviously would have got loads of people on board, but I don't know, you they've got to make cuts somewhere.

You know, everyone, everyone has their opinions on where the c the government should be spending their money.

As you said, we're not gonna go into that today.

But I get comments on it all the time.

But you know, they raise taxes on business.

Yeah.

And so that's like, and that that's not hurt a lot of my friends who've got businesses, have had to cut workers or or raise prices, which has been nuts.

Yeah.

Well, the main thing, the well, I say the main thing, one of the really big things, the employer's NI, um, is massive.

So that's the they're increasing it from uh, well, they've just increased it to 13 from 13.8% to 15%.

And they've turned around and said, you know, we're we're not hurting the worker, it's for the employer.

But it's so short-sighted because in turn, the employer might not be able to pay the this increased NI.

Also, along with the increased NI percentage, the threshold to pay it has decreased from 9,100 to 5,000 pounds.

So so many people are now gonna fall into that.

And people could be laid off because companies might not be able to pay them.

So it's just it's a really sad time.

Totally.

Yeah, completely.

Uh, you know, Sainsbury's alone is like £230 million a year increase in employee costs.

Where's that going?

It's going on the eggs, it's going on the milk, and it's going uh Absolutely.

There there's gonna be less workers in the shop, yeah, essentially.

Yeah.

Um, so you know.