FIRE v London

Labour leadership challenger Owen Smith has proposed a ‘wealth tax’ to raise £2.8bn from ‘the top 1%’. What might this mean for financially independent people, Londoners and the like?

What are wealth taxes

A tax on wealth, literally, means a tax on assets.  The UK has no annual tax based on asset value, unlike many countries.  A surprising number of countries do tax assets, for instance:

• The USA has real estate tax – over 1% per year in most of the ‘best’ states.
• The Netherlands taxes possessions of more than €21k at 1.2% per year.
• France taxes wealth of over €800k, at rates of 0.5%-1.5%.

Owen Smith is however not proposing taxing assets.  There is a good reason for this.  Having to value your entire asset base every year is a massive amount of work.  Having to report this to the tax authorities is a major invasion of privacy, at least relative to only reporting income (akin to a business now needing to report its balance sheet as well as its profit statement).  And this being done in a way that doesn’t clog up the bureaucracy would be difficult to implement quickly.

The simple way to tax assets is to tax property.  The database exists.  Valuations are not that expensive to update. And they can’t flee the country.  More on this below.

Continue reading “My proposed Wealth Tax” →

I was on a business trip up north today.  I took the train.  A fellow got on somewhat north of London and, clocking something about me, was obviously up for a chat.  I told him what I did, keeping details as vague as possible, and definitely not mentioning anything FIRE-related, and then asked him what he did.  He said he was a masters student in Chemistry at an ex-polytechnic somewhat north of the Watford gap.  What did he want to do next?  Well, he wasn’t sure, but ideally he wouldn’t work for anybody but would have his money work for him instead.

I couldn’t quite believe my ears.  With the tiny audience I get for my blog and the resolute disinterest paid by my well-educated affluent friends to anything remotely approaching financial independence, I feel that FI/RE is an extremely niche activity.  Practised by hundreds of Brits at most.  And yet here was a stranger on a train, in his 20s and not having started his career yet, telling me in his opening gambit that he wants his money to work for him so he doesn’t have to work.

Not quite sure this wasn’t a wind-up, I asked him if he read any blogs.  Not really.  But he is reading Rich Dad Poor Dad (which has had more impact on me than practically any other), wants to read Buffett’s letters to shareholders and was aware of a couple of others.  This kid was for real.

The UK is changing for the better when you can find yourself talking about FI/RE on a train in full earshot of the train carriage.  I don’t talk about this at all with most people I know, though some people who know me well know I invest knowledgeably and a few will know that investing is quite a hobby of mine (and/or that I can drone on about it!). How long before the BBC does a show about it?