Why Investing a Portion of Your Salary Can Save You from Tax Drains

In the UK, high earners can see a significant portion of their salary consumed by taxes. Consider an annual salary of £200,000: after income tax and National Insurance Contributions (NICs), the net income drops substantially, and further spending incurs Value Added Tax (VAT). Without strategic financial planning, you might find a large chunk of your earnings siphoned off by the taxman. Here’s a closer look at the numbers and why investing a portion of your wages can be a savvy move to preserve and grow your wealth.

Understanding the Tax Burden

First, let’s break down the taxes on a £200,000 salary:

1. Income Tax and National Insurance Contributions: — Income Tax: £71,175 — Employee NICs: £7,518.60 — Employer NICs: £26,374.20

Net Income after tax and NICs: £121,306.40

2. Spending Net Income and VAT: — When you spend your net income, you pay 20% VAT. — For every £1 spent, approximately 16.67p is VAT (since VAT is calculated on the price inclusive of VAT).

VAT on Net Income: £21,470.83 — This leaves you with £107,354.17 for actual consumption.

Total Taxes Paid

In total, you end up paying: - Income Tax and NICs: £78,693.60 - VAT on Spending: £21,470.83

Total Taxes Paid: £100,164.43, or 50.08% of your gross salary.

The Impact of Investing

Instead of spending all your post-tax income, consider investing a portion of it. Here’s how investing can alleviate your tax burden and potentially grow your wealth:

1. Tax-Advantaged Accounts: — Individual Savings Accounts (ISAs): Up to £20,000 per year can be invested without paying any tax on the income or capital gains. — Pension Contributions: Contributions to your pension scheme can reduce your taxable income, providing immediate tax relief and growing your retirement savings tax-free.

2. Long-Term Growth: — Stocks and Bonds: Investing in a diversified portfolio can yield returns that outpace inflation and taxes over time. — Real Estate: Property investments can provide rental income and potential capital appreciation, with various tax advantages depending on how you structure the investment.

3. Compound Interest: — Money invested wisely compounds over time, meaning your earnings generate further earnings. This can substantially increase your wealth compared to simply spending your net income and paying VAT.

A Strategic Example

Let’s say you decide to invest £50,000 of your net income in an ISA:

- Immediate Tax Savings: The money in the ISA grows tax-free. - Potential Growth: Assuming an average annual return of 7%, your £50,000 could grow to over £70,000 in five years, outpacing inflation and taxes.

By investing, not only do you shield part of your income from further taxation, but you also put your money to work, potentially earning more than you would by spending it all.

Conclusion

High earners face a significant tax burden in the UK, but strategic investing can mitigate this. By investing a portion of your salary in tax-advantaged accounts and long-term growth opportunities, you can reduce the amount lost to taxes and build a more substantial financial future. Don’t let your hard-earned money slip away to taxes; invest wisely and watch your wealth grow.

Here are some corrected ideas for investments:

• Fund investment with prime located art gallery in Mayfair, London
• Real estate investments starting at £50,000
• Electric vehicle innovation starting at £250,000
• Sustainable energy
• Franchise group in partnership with Walmart

Contact: Mollen@post.com

Investments are done directly to the owners

The Dominus Art Fund · Part-timeThe Dominus Art Fund · Part-timeJun 2024 - Present · 1 moJun 2024 to Present · 1 moLondon Area, United Kingdom · HybridLondon Area, United Kingdom · Hybrid

Welcome to The Dominus Art Fund

• The Dominus Art Fund invites investors and art enthusiasts to join us in our mission. Our vision is to discover, restore, and preserve art and antiques so that future generations can enjoy them. For investors, this is an opportunity to earn passive income while supporting our journey. Located in the prestigious Mayfair district of London, our fiscal art gallery is more than just a space—it's an experience.
• Owning and using the antiques we uncover and bring to the market allows you to feel the history and craftsmanship of each piece. While the fine art and antique market may not be considered futuristic, it is certainly ‘futureproof.’ Its assets are often obsolete, very rare, limited, and in many cases, unique. According to the annual Art Basel and UBS Global Art Market Report (April 2023), "Worldwide art and antiques sales reached an estimated $67.8 billion in 2022, up 3 percent compared with a year earlier, lifting the market higher than its pre-pandemic level in 2019."
• Our team has identified a significant gap in expertise regarding product selection, restoration requirements, and the sale of fine art and furniture pieces worldwide. We are a vertically integrated business that acquires, restores, adds value to, and sells art and antiques to a clientele we've cultivated over many years. We offer a security-backed investment opportunity structured for scalability, with aspirations to grow annually and deliver market-leading returns. Join us in preserving the past and securing your future with The Dominus Art Fund.
• Contact: mollen@post.com

Note: I am not advising on any investments. This post is for educational purposes only. Always check thoroughly before investing and do your own homework.