Whatever the outcome, it now seems very likely that David Cameron will be PM and George Osborne will be Chancellor. Maybe people missed the announcement at the time and have forgotten about David Cameron's proposed policy on income tax to be payable on interest on savings. In the new tax year, the rates you pay are 0%, 20%, 40% and 50%, losing all allowances and paying an effective rate of 50% if you fall into that band, whether the income is from employment or just yield on capital. Of course, this puts the tax paid by the "socialite" "unemployed" "trustafarian" private income set at 50%, higher than pretty much anywhere that doesn't have a full-on wealth tax like France or Norway. It is higher than the top rate of 45% charged in Denmark.
Personally, I feel the same about paying the 50% rate as I did about the 20% and 40% rates combined. On a gross income of say £200,000, there is no way I am giving half of it straight to the government to bribe the public sector payroll vote and all the other wasteful things that were once listed by Sir Humphrey. If I were getting such interest payments from my money I would have to move my domicile and move to a permanent home in Brussels or Malmo, Sweden and pay 15% or 30% on the interest. 50% is far too high, especially for an anarcho-capitalist, even if David Cameron was in power and taking an axe to the state sector.
But he did propose, without mentioning the new top rate, removing all taxation of savings that does not fall into the higher rates. So those paying 20% would pay no tax on savings, making cash ISAs obsolete. Only those paying the 40% or 50% rates would pay them, and he'll probably get rid of the 50% rate on everything within 5 years of office.
My calculations have shown that not only would UK domicile again be acceptable, for those on smallish incomes it could become very attractive.
For reasonable incomes under £150,000 you would only pay the 40% tax on the excess beyond £37,400. You could arrange interest payments of this amount and your tax would be zero. At £40,000 your tax rate would be 2.6%. At £50,000 it would be 10%. At £100,000 it would be 25%, which is still better than many European countries, although Spain, for example, would only tax you 19%, on any amount.
It would be quite easy to invest enough of your millions in property, in the UK or abroad, and spend some of your capital on things that you cannot buy out of your interest income after tax, like cars, so as to have say, only £1m pounds left, which even if rates went up to 5%, would only yield the £50,000, which would be taxed at just 10%. Upon moving your domicile you can liquidate your investments (after moving to a domicile that has no cap gains tax, like Belgium or Austria) and regain the monetary income. But I would have thought that, as long as you lived outside the M25 it would be quite possible to fund regular expenses like fuel and food on £37,400 / annum.
Howzat for class war.
