The 37 taxes you pay and why it now takes £3.1m to feel 'wealthy'

0:01Lee Boyce: Welcome to This Is Money podcast sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Simon Lambert today is Lee Boyce. And coming up, when tax rises don't always bring in more cash for the Treasury coffers. As the government weighs up introducing yet another tax, this time a wealth tax, we explore why despite the allowance being slashed, the capital gains tax take is down and what does that mean for the Chancellor's plans? Also today, who wants to be a millionaire? We offer expert tips on how to build more wealth wherever you live in the UK. What would you ask a financial advisor right now?

0:39Lee Boyce: We explore the six burning questions that people are wanting to know and we get the expert answers. Plus, we look at a creative way to get around inheritance tax. But would it work? Don't forget, you can stay up to date with all the latest breaking money news just go to thisismoney.co.uk or download the app take control of your finances

0:58Georgie Frost: with charles stanley direct invest save coach or plan using technology where it's helpful and people where it matters our website and app make trading cost effective and flexible but we're more than just an online investment service we're here for you regardless of your financial needs, or if your life takes an unexpected turn. Your finances, your way. Take control today with Charles Stanley Direct.

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1:29Simon Lambert: Investment involves risk.

1:30Lee Boyce: But first, the UK tax burden is at the highest it's been since the Second World War. We know this. And yet the government seems determined to find ways to take even more of our hard-earned cash. The idea, being widely mooted at the moment, is a wealth tax. Now, we already pay 37 levies, yes, 37, which amounts to an average of 57 % for the average household's income. Don't believe us? This is Money have listed them all on their website. But will more taxes bring in more cash for the government? The latest capital gains tax receipts suggest that might not always be the case. but before we get to that lee simon welcome lee 37 taxes i know this story uh actually is something

2:17Georgie Frost: that's been on my mind for quite a long time because i think a lot of people think about their tax how much they pay in tax when it comes to their salary and whether you're an additional rate payer high rate pay or basic rate payer and how much of your salary gets sort of swallowed up by that i think lots of us are kind of you know well attuned to how much of our take-home pay is is eaten up by tax but there's lots of additional uh bits and bobs uh that really add up and i think if you sat down uh with a calculator and worked out what your true tax take is you might be quite surprised and i think you wouldn't be surprised to hear me saying this because i've been going on about this for quite a while i think that there's a kind of tipping point of people fed up with the amount of tax that they're paying and i think we're really seeing that at the moment i can't move for the amount of social media posts of move to dubai is tax-free i mean it's you know it's just like you yeah but you you kind of understand it when you've got especially middle earners just feeling like tax is just up up and up so this story i thought was really interesting because it went into real detail about how much is swallowed up by tax because it isn't just income tax now income tax is number one so it's like listed from one to 37 here and on the size of it and it's done on an average per household so of course averaging everything out you know gives a very broad picture which is why i say you need to sit down with a calculator to work out your own tax date but income tax is 10 631 pounds per average household number two is national insurance is 6070 pounds i don't think either of those two would come as a surprise to be one too and number three uh is value added tax vat 6025 pounds that's not too far off national insurance pretty similar they are the three biggest by some way and then you start going down and this is where i start saying it's the taxes that you because they don't come directly out of your pay you might not necessarily club it all together so number four is council tax 1768 pounds now is the average again this week i feel like there's been lots of social media posts about council tax uh in in particular, Jay Atlee in between us talking about a charge for his green bin, which I think a lot of us are starting to feel the pain of.

4:35Georgie Frost: I paid council tax. Why am I having to pay extra for my green bin now? That seems to be the latest move from councils. Number five, corporation tax, 1448. Let me start getting to the taxes that are kind of under£1 ,000 per year, but add up. So fuel duty,£869. Business rates,£880. Stamp duty. Okay, not everyone buys a home every year, but it's a big bill if you do and in 2024-25 there's a 13.8 billion pound stamp duty bill that's an average of 489 pounds per household if you smooth it out over everyone capital gains tax 460 pounds alcohol taxes 436 pounds vehicle exercise duty 320 pounds my pet hate insurance premium tax is number 12 on this list 313 pounds if you have insurance which most of us would have insurance when it comes to household insurance travel insurance car insurance 8.9 billion pounds the government rates in from IPT last year gets passed on directly to consumers it's a crazy amount of money to do the right thing and get insured uh tobacco duty I think this has fallen a little bit but 279 pounds student loan repayments again this is smoothed out over all households so £199 and custom duties£173.

5:52Georgie Frost: That's just the top 15. To tell you other things that are in here and how much detail there is in this number 19 for example TV license that's definitely a tax the climate change levy at number 23 that's costing£63 a year plastic packaging you know

6:09Lee Boyce: £10. So when you said you when you said people might be surprised at this Lee you didn't mean

6:15Georgie Frost: oh thanks a bunch of flowers surprise you meant it's it's not a cheery cheery read because this really does just pile into how much we are getting taxed and how much more could we possibly be taxed and what could come up in uh the budget in a couple of months time you know because where else do you tax us the total taxes per average household according to this is 31 623 pounds and shortly

6:41Lee Boyce: Well, you made a good point about the bins. Just extra little bits wherever we can. New parking charges in the local high street. It just feels like there's so much. There's not even just taxes. It's the additional extras.

6:55Georgie Frost: The extras and the extras that, you know, you might not typically say it's a tax or you might not think of it as a tax, but it really is a tax. It's charges and things that you can't get around for how you're living. and i think that's where people are starting to really feel a bit annoyed about things you know council tax is already number four in this list and it's going up and up and now we've been asked to do the additional thing starts with a green waste bin where does it end so now listen i i kind of been banging this drum for a while now and with the frozen thresholds when it comes to high rate taxpayers you know especially i think people were just kind of moving up their career ladder and then feeling quite hard done by when it feels like you are being penalised for doing well in your career and everything is just adding up.

7:48Georgie Frost: And the amount of money you actually end up with at the end of the month is probably not what you truly deserve.

7:54Lee Boyce: I don't think people would mind if they thought the local services were getting a lot better, for example, and generally services were getting better, but it doesn't really feel like they are. Simon, before we get to capital gains tax. One area that's being looked at quite deeply, I don't know how true that is, or it's just what we're reading in all the papers, but it's a wealth tax. Now, obviously, that's not going to affect the average household. But again, another tax. What's a wealth tax, Simon?

8:21Simon Lambert: A wealth tax is an idea that is very popular with certain campaigners largely on the left who argue that basically accumulated wealth and people being able to live off accumulated wealth and not taxing them is unfair because those people with incomes who rely on their incomes are taxed and those people with wealth are not. It comes in various forms. One that has been suggested is a 2 % tax on people who have more than 10 million. But the problem is, is there's not that many people who have more than 10 million and they tend to be quite mobile. So then you start saying, oh, well, maybe we should put a tax on people who have more than 2 million instead then you start dragging people into it who potentially might not consider themselves to be wealthy we're going to talk about this later how much people feel they need to be wealthy nowadays but if you take a scenario where somebody lives in a certain part of the country a not that huge mansion like impressive house could be taking you well over the million into the one and a half million stakes.

9:30Simon Lambert: And then if they don't have a mortgage on it, because you'd have to presume that you're taking off the mortgage, and then you add on, you know, are we going to include their pension pots, that's including the inheritance tax now, and then their savings, all of a sudden, you see people ticking over that 2 million who probably wouldn't be considered to be the super rich and the people for whom a wealth tax is talked about being targeted at and the people for whom all of that wealth came from income that was already taxed and this is where you start to get a problem now you could argue and you can argue that for example house price wealth which makes up a lot of people's uh wealth is not earned that that's thanks to house price inflation however the people who have benefited from that house price inflation have dealt with the consequences of that house price inflation.

10:20Simon Lambert: They've paid the mortgages over the years. If they're of our generation and they live in expensive homes, then they would have had to take out a massive mortgage, a multiple of the mortgages that their parents' generations had to take out. And we'll be paying huge amounts every month in mortgage payments and interests. And the only winners from that are the banks and the building societies. If it's our parents' generation, they went through the 10 % interest rates era. Now they are the generation that has benefited the most from high house price inflation, but they're now having to hand over money to their children and their grandchildren because due to that high house price inflation and low wage growth, they can't get onto the property ladder.

10:58Simon Lambert: Now, there were some who said, well, look, this is just completely unfair and actually it's skewed towards parts of the country and we need to redistribute this. But then some of this is already being redistributed because we already have taxes on wealth. Inheritance tax, we had figures yesterday, the number of people who are caught in the inheritance tax net has doubled i believe in the last decade and it's going to go up a lot more once pensions get dragged into it capital gains tax which we'll talk about that in a minute tax or savings the threshold on savings the personal savings allowance hasn't risen since it was introduced uh it's a thousand pounds for basic rate taxpayers it's only 500 pounds for higher rate taxpayers and there's a lot more of them nowadays because people have been fiscally dragged up the tax bands and additional rate taxpayers of which there are also a lot more nowadays, don't get a savings allowance at all.

11:43Simon Lambert: You then got the income tax thing, where, as I said, we're dragging more people into higher rate tax. We're dragging more people into the 60 % tax trap. If that£100 ,000 limit had risen since it was introduced, it'd be about£180 ,000 now. It's just this general squeeze that Lee was talking about. And then you bring in things like council tax, etc. Car tax. I mean, okay, I realize I am an outlier here, right? I have three cars, which is excessive, okay? But like one of them is a classic car that doesn't get driven much the other one is a nearly 20 year old car that doesn't get driven that much and then we've got our family car we fork out 110 pound a month in car tax i mean this is out of choice don't feel sorry for me here but you know it's still a lot of money council tax 325 quid a month we're paying for council tax and then to go back to the point you made earlier you know our local councilst albans district council in its wisdom in the town i live in which is notst albans has decided to bring in parking charges in order to raise more revenue.

12:40Simon Lambert: This was a place that parking wasn't really a problem and was one of the few towns that actually had a relatively thriving high street. Now, if you drive down there on a Saturday afternoon, I mean, it's great because you can definitely park. I'm not so sure that's really that good for the businesses. But the council says, no, no, no, it's fine. It's all working fine. It's all working fine. But the council has to do this because the council doesn't have a choice because the council tax system is totally broken. We collect money from councils. it all goes centrally and then it gets redistributed around the country and they get you know much less than they bring in but we can't do anything about the council tax system because government's worried about doing anything about it and also then it's just going to end up hitting those people who are already paying all the taxes anyway we've said we're not going to raise all these other taxes we won't go into that again but we've kind of stuck in what has been described as a bit of a doom loop and i do think that we've got to the point where some of these taxes and some of these tax increases especially the stuff which I've described before as a budget airline tax system where we're keeping the the headline price low with this promise not to raise you know national insurance income tax etc but then we're just trying to get people on extras everywhere else you know and I think it's counterproductive and just to say actually you know when it comes to paying taxes I don't have any problem paying tax I don't like paying taxes I'm not a masochist right but I don't have any problem paying my taxes and I consider myself to be very lucky and I have no problem with an income tax system that steps up the scale as your earnings go up and sees the highest earners pay more and so on.

14:14Simon Lambert: What I do have a problem with is the mess of a tax system that we have, the way it treats people unfairly at their various points through it and the way that it is counterproductive in some of those things where you're just like if you just sorted this stuff out it would sort of improve things. I mean, as I've said before, the cottage industry and people trying to earn less money at certain points in order to keep their incomes below certain thresholds is not a good thing to have.

14:43Lee Boyce: Yeah, you've hit the nail on the head there. It's massively overcomplicated. And the problem is when we have a budget, which we do coming up, which is why we're talking a lot about tax, is there's loads of tinkering around. It's like, what could come next? All of this change. And Of course, we've had the allowance slashed. And then in the spring statement, the Chancellor increased the rates at which you pay it. It feels like very arbitrary and anything is gained, Simon. And if you want people to play by the rules, because a lot of people don't, you need to make it simple. You need to make it feel fair.

15:23Lee Boyce: And I think at the moment, it feels neither of those things.

15:26Simon Lambert: I would agree with you. And on this capital gains tax thing, There is this suggestion that tax rates don't always raise the tax take. It's a warning that gets regularly sounded to governments. It is one that is rarely heeded. It's easy to ignore because you can say well it's just vested interest who don't want the tax to rise. And actually in many cases it is just vested interest who don't want the tax to rise. And the statement comes with relatively little supporting evidence because it's quite difficult to actually find the supporting evidence. But there is one tax that we have managed to meddle with so many times over the years that catches enough people in its net and also offers the opportunity to change your behaviour that provides some very, very interesting statistics on this.

16:15Simon Lambert: And that's capital gains tax. So there was a big cut in the capital gains tax allowance made by former Chancellor Jeremy Hunt that kicked in in the 2023 to 2024 tax year. It was slashed from£12 ,300 to£6 ,000. That was a huge cut. Tory Chancellor, just to say, Jeremy Hunt. Now, that was actively aimed at raising revenue when we did this sort of slightly mad thing of trying to claw back too much money too quickly post-COVID pandemic lockdowns. But some HMRC data that was out last week showed that actually capital gains tax receipts tanked by 18 % to 12.1 billion that year, which is the opposite of what should have happened.

16:59Simon Lambert: Now, this is people either deciding not to sell or suddenly alerted them to capital gains tax in a way that it wouldn't have done. So they started doing things in a more tax efficient way. They put more money into ISAs where they wouldn't have capital gains tax. Or when they were selling investments, they spread them over tax years. They passed stuff to their spouses. So because you can do that free of capital gains tax, things like this basically changed people's behavior to the point where effectively by cutting the allowance by that much, it was a big tax hike, but actually we got less money in.

17:30Simon Lambert: Now the following tax year, the capital gains tax allowance was halved again to just£3 ,000. It is pitiful compared to what it was. That means that people with even relatively modest profits should be caught in its net. people like with work share save schemes, investments held outside of ISAs, people lucky enough to hold Rolls-Royce shares, that kind of thing. Yet there were some separate provisional HMRC figures that indicate that the capital gains tax take tumbled another 10 % in 2024 to 2025. And that's before Rachel Reeves' hike in the rate kicked in, which came in in the autumn budget. And it doesn't bode well for the forecasts that, you know, this capital gains tax take is going to keep rising and giving us more money.

18:19Simon Lambert: It actually seems to indicate that it might be something that's backfired.

18:24Lee Boyce: So people are just sat on selling anything, right? Is that what you're suggesting? That's what's causing this? Are they being a bit more strategic about it?

18:33Simon Lambert: It's a combination of the two things. It's raised awareness dramatically. it's encouraged people to do tax saving things that they might not otherwise have done but also it is it's a big hit so if you've got someone who's got a 15 000 pound profit on some shares now that is a big profit on some shares but maybe on a on a lot of different shareholdings that they're going to sell previously they could have got 12 300 pounds for that tax free and if they were a high rate taxpayer they'd pay 20 on the remaining 2 700 pounds so that's a 540 pound tax bill so you're like okay we're making a 15 000 pound profit i'll pay 540 pounds worth tax fine i'll sell by the time jeremy hunter finished with things and the capital gains tax allowance was in tatters at 3 000 pounds they would be taxed on 12 000 pounds and they would face a 2 400 pound bill so people look at that and go well i'm not going to sell i don't want to pay 2 400 pounds in tax now they're still making a profit they're still making more than they're paying out in tax but that's not how people's brains work you go back to this behavioral finance stuff and it stops people from selling i've had so many conversations with people about this so well i'm not no i'm not selling now i'd have to pay too much in tax and they sit there and they say well do you know what at some point they might reverse this you know they might get another government who ups the allowance or lowers the rate and actually do you know i don't really need the money now i'll just sit on it so that so they sit on it and yeah it changes people's behavior

20:00Lee Boyce: I mean, I keep hearing speculation or suggestions about bringing capital gains tax in line with income tax. So it doesn't look like it's going backwards to a better time. It looks like it's going forwards to where you might have to pay even more.

20:14Simon Lambert: And this is what's interesting about this is that there is this quite a heavy lobby for that to happen. And on the other side of the coin, there is quite a lot of voices saying, if you do that, you will not raise the money that you think that you will raise because people will just not cash in their gains you will have enough people not cashing in gains and paying capital gains tax that you won't raise the money that you think you will and there's something called the laffer curve which is uh you know anybody who's done economics knows about which is a curve that shows that like the higher a tax rate goes the the more you raise from it as you reach a certain point where you start tipping over the other end and people will start avoid doing anything they possibly can to avoid it and the tax take starts to come down.

21:01Simon Lambert: And it's possible that capital gains tax has gone over the top of the Laffer Curve. It's possible that it hasn't. It's only one piece of data. It doesn't prove anything. But it is something that's worth looking at. And I think it's also something that's worth looking at in terms of, you know, maybe allowing people to make bigger profits tax-free, removing income tax traps, cutting the inheritance tax rate from 40 % to 20 % so that people aren't so fussed about it. Maybe that could actually lead to more money coming in rather than less.

21:29Lee Boyce: I don't think that sort of policy is the trajectory of this current government, though. I could be wrong. Lee, I've been reading again over the last year, change in non-DOM status, higher taxes, all of the millionaires are leaving. And then I read last week, actually, maybe those statistics aren't quite as accurate as we thought. But I mean, is there something to be said about if you keep squeezing the rich, they're just going to leave? And then again, like Simon says, you're not going to bring in as much money.

21:58Georgie Frost: well yeah exactly it just changed behavior doesn't it let's face it the ultra wealthy typically no ways means and ways to keep their money tax efficient and potentially move around around the world rather than just being stuck in one place and yeah there has been some big figures big numbers banded around about this flight of ultra wealthy people but i'm actually i think i'm more concerned about not the ultra wealthy but more the people the kind of aspirational talent drain that it feels like it's happening at the moment with people having their head turned you know to move abroad i remember when i was sort of early 20s late late teens early 20s i had quite a few friends actually that did move to dubai for example because it was at the time and as it is still now tax-free uh but most of the most of my friends obviously the winner did that were solo they were single they were carefree footloose when i did it there's been a bit of a shift it feels like of actual families uprooting and doing this now and moving away permanently because opportunities to earn their salary tax-free and feel like they have a better standard of life and i think that's quite a sad kind of state of affairs now i'm not saying that everyone's doing this but as i said at the top of the show it feels like there has been a bit of a push away to this this kind of thing and i do i do agree if there's a wealth tax and it's been proved in other countries that have tried to do this before you know wealthy will just take flight you know why would they want to keep paying over the odds tax and a lot of the argument would be that people feel like they've paid a fair share of tax but i think there's this other misconception about wealth as well that a lot of people just think that wealth is inherited or you know it's passed down the generations yeah that is true for some people but for others they've worked hard to become successful to be successful in their career and they feel like they're then being penalized for that success and i think a wealth tax kind of okay we're talking about over 10 million pounds that's quite a big chunk of change i just don't think it will do what people think it would do i just think i think people would just go nah now that's step too far i'm out of it and i think that is genuinely what would happen.

24:18Lee Boyce: Do you know what worries me about things like this is not so much about the now because the 2 million, 5 million, 10 million is enormous about now but as we know from frozen everything come 20 years or something 20-30 years so many more people will be caught up in these things so what once for inheritance tax is a great example what once was supposed to be for the super super wealthy is getting more and more average people caught up in it.

24:44Georgie Frost: Georgie Unless you're going to be earning£10 million in the next couple of years.

24:47Lee Boyce: Mate, honestly, that's the goal. Five years.

24:50Georgie Frost: That's the aspiration that we should be driving. That's the entrepreneurial spirit and the hard work that we should be encouraging.

24:56Lee Boyce: I was thinking more like the£2 million, but even though that might be a bit pushing it. But you know what I mean? It's the point of the fact that what was, you know, maybe 100 years, but I won't be alive. But, you know, it's that sort of mentality, isn't it?

25:08Simon Lambert: I 100 % agree with this. and we've seen this in action actually with a form of wealth tax that was introduced in this country the pension lifetime allowance was introduced at one and a half million pounds by a labor government it was then raised all the way up to 1.8 million by a labor government which the blair brown government and then the brown government that recognized you know that you needed to move these things up in line with you know in in this case asset price inflation because people invested in their pensions but also that the cost of living and things like that what will that pension actually buy under the tories it was then cut all the way to a million pounds at the same time as the cost of living rose substantially the amount that you'd need in the pension pot to secure the same pension income asset prices went up and everything like that it was then finally abolished by them because it was causing so many problems that it was threatening to crash the nhs but that was the only reason they abolished it i don't believe that they would have got rid of it if it wasn't for the fact that it was causing so many problems in the nhs and then there was all these ideas on how to fix it and then eventually it was just like if we fix it for the doctors but we don't fix it for the police officers and everybody else it just caused problems here and then in the end they just went you know we should just get rid of it but also you know the amount the annual allowance of what you could put into a pension that was introduced again by gordon brown a much higher level and then it was lowered and lowered and lowered so you can't it's all very well you know saying well this government this labor government rachel reeves the left the left the left it was the tories who were responsible for most of this stuff it was the tories who did it with the pension lifetime allowance it was the tories who did it with the pension annual allowance it's the tories who started the income tax freeze it's the tories who did nothing about 60 tax trap It's the Tories who did nothing about child benefit tax trap.

27:03Simon Lambert: It's the Tories who allowed our tax system to become such a mess. So, yeah, I would say with something like this, one of the reasons why I am against wealth tax is it will start at this level. And they'll go, oh, it's not raising enough money. So we'll bring it down to that level. Or actually, we need a bit of money to bring it down to that level and that level and that level. And frankly, you can't trust whoever's in government not to do that. Doesn't matter what political hue they are of.

27:25Lee Boyce: Do you remember Biker Grove, PJ and Duncan? The wisdom of Biker Grove. I'll probably cut this out and they said once you've had sex you can't go back to holding hands it's a bit like that Simon once the I know

27:37Simon Lambert: the wisdom of Biker Grove just to be clear they were talking about other people this wasn't PJ and Duncan

27:42Lee Boyce: no not having sex together

27:44Simon Lambert: the main thing I took away from Biker Grove was that you need to be really careful paintballing

27:48Lee Boyce: yeah poor PJ or Duncan still can't tell the difference oh dear how much do you think you need Lee to feel wealthy what do you reckon Lee give me a ballpark 10 million uh I feel wealthy enough already Georgie

28:04Georgie Frost: in other words in other ways in my life you know it's not just that what it's not just all about money to quote Epiketis the Greek philosopher wealth consists not in having great possessions than having few wants now the reason why I say that I have to come back from Greece B that is a comment in our reader comment section on the story we're about to talk to now but With something PJ and Duncan to Greek philosophers. I mean, what can I say? This show has it all.

28:32Lee Boyce: The great philosophers of past and current. Yes, the point we're talking about here is because the answer, if we're talking about financial wealth, obviously we're all wealthy in wonderful ways with family and life, etc. But if we're talking about just money here or assets, the answer may have less to do with how much you got in the bank or what house you have or whatever, more about where you live. So the average Briton reckons you need now 3.1 million to consider yourself wealthy. But let's be honest, 3.1 million will go a lot further in the North East than it will go in Knightsbridge, for example.

29:12Lee Boyce: So Lee, what is this research? But also, what is wealth? And again, I'm going on the financial aspect here, Lee. What is included? Like pensions?

29:23Georgie Frost: It's everything. So you're talking about your household net wealth. You're talking about your house price, the amount of money in your bank, pension, investments, everything all clubbed into one. And actually, I think a lot of us have grown up with that mentality of a million pounds is a lot of money. And it is a lot of money, but it's not as much, you know, the power of inflation, etc. A million pounds, actually, it still goes far. And it's a bit nice to have a million pounds. but I do understand this kind of mentality a little bit now that one million pounds feels like it just doesn't cut it to be labeled wealthy anymore now but it does depend as you say whereabouts you are in the country and this was a research exclusive research from AJ Bell quiz people across the country to ask them how much they said they would need to feel wealthy now unsurprisingly top of the list is London at 5.9 million pounds at the bottom of the list is sheffield at 700 000 pounds that's a massive massive difference but number two uh liverpool 5.1 million i mean that's quite a big amount and cardiff for manchester 3.5 and 3.4 million respectively and then you go down a little bit yeah it's brighton in 12 with 2 million and norwich 14th with 1.9 so it's quite quite a vary around around the country and i think it's just that kind of notion that a million pounds just doesn't feel all that much so looking at it from a from a generational point of view it's actually millennials of which i fall into the category of saying that they need 4.1 million pounds to feel wealthy those age 79 and older think 1.9 million is a lot but you know time's running out for them so probably it's that classic chart that you see you know the wealth versus time you know once you hit that point it's time versus wealth that it becomes more important and more poignant and then the youngest youngest adults gen z 18 to 27 said 2.6 million pounds uh same for gen x which is 44 to 59 2.6 million baby boomer 60 to 78 say 3 million so actually millennials really are kind of feeling that kind of pressure i guess to to be feeling like they should have more money in the bank and be wealthier.

31:36Georgie Frost: But I think the real point of this is, in this service, one in four Britons believe that they will one day become wealthy. How much of that is inheritance? I'm thinking what they're getting further down the line is, I don't know, we've been going to that kind of detail. But the median household wealth in Britain, which is property, saviors, pensions and other assets, £293 ,700. pounds that's according to the most recent office for national statistics data that's some way of 3.1 million pounds isn't it georgie and actually the top top 10 percent of households total wealth 1.2 million still some way off that 3 million um household uh wealth peaks unsurprisingly between the ages of 65 to 74 you've probably got a nice pension pot if you've done the right thing you have probably got a house not everyone but if you got a house and you've probably paid the mortgage off peaks at 65 74 502 500 pounds and then after that age you know if things like care fees that start to buy i think that's quite interesting i think that the 293 000 versus 3.1 million it's it was obviously that skews a lot because there will be people that have way way more than that and there'll be people that have way less than that i think the notion of being wealthy is a combination of a lot of different things i think that having enough money at the end of the month after all of your bills and taxes just to go back leap back to what we were saying at the start of the show i think if you're clearing you know a nice amount and you can either save that invest that and have a good time with it and not feel pressured about money that's what true wealth is to me to not have arguments with you know potentially your partner or family about my not to have waking up in the morning worried about money i think that's true wealth personally rather than saying i've got 3.1 million pounds of assets i'm wealthy i think wealth is having a kind of no pressure or fears about your finances and being you know not being in a huge amount of debt, you know, excluding mortgage and having the time to be able to enjoy it all.

33:52Georgie Frost: I'm like the ethics philosopher here.

33:54Lee Boyce: No, 100%. No, I love it. It's PJ and Duncan philosophy.

34:00Georgie Frost: I think I sit somewhere in between PJ and Duncan and Greek philosophy, I hope.

34:05Lee Boyce: I wonder if it goes to the fact that you are probably in a quite a secure position, not in a 3.1 million but financially you are sensible and you've done the right things and for someone of your age you're probably in quite a good position so you can see where value comes

34:24Georgie Frost: from do you know what I mean exactly it hasn't it hasn't always been that way George you know I came out my racked up massive student debts that you know thankfully I've paid off I grew up not particularly wealthy if I'm being quite frank I've lived on that poverty line I do know what it's like. And I think that's why, yeah, it probably does skew your version of wealth and what feels wealthy.

34:45Lee Boyce: Yeah. What was interesting is I actually did a TV show about who wants to be a millionaire, looking at the way that a million pounds has changed since when the show first came out in 1997 to now. And what's interesting, and this obviously goes a lot into house prices, but back Back in 1997, you could, with your 1 million, buy about 15 averagely priced homes. Now you can buy about three and a half. Like I say, that obviously includes house price inflation, which is ridiculous. But it does go to show that in what is my lifetime, what was once a really very healthy figure hasn't got quite the same kudos.

35:26Lee Boyce: Simon?

35:26Simon Lambert: i mean i'm looking within a 10 mile radius of where i live which to be fair is one of the most expensive parts of the country if i was genuinely going to feel wealthy if i wanted to genuinely feel rich right so i think i feel wealthy personally now right okay but if we're defining this as what i would need to truly feel rich i'd probably want a big house with some acreage i'm going to need some some land in in all honesty right because i'd like some land around me to feel truly rich you know you're looking at probably four to five million for that i mean you might squeak in around the three and a half mark if you could find something pretty good and i think there's houses i've lost lusted after with a bit of land you know throughout my life that i've seen go for for three and a half million and then you're going to need enough money so that you don't have to to work but you're also going to need enough money to keep up that three and a half million pound house you want to gonna want a second home i don't know i think maybe just holidays second homes to me i've said this before it sounds like a lot of work so yeah i could see how you probably might need five or six million just to keep things ticking over but as i said it depends on your your outlook in life and what what you need if you're just like actually do you know what i'm comfortable i have a nice life i don't want for anything then you can feel wealthy on a lot less than that and i do feel wealthy and i have a lot less money than that yeah but you've also spoken to the experts about what what you can do to increase your wealth is that right lee

37:00Georgie Frost: yeah we have and to be honest and to be honest with you um leave the country move to dubai right is that oh yeah exactly okay but there's there's quite a bit of a say best savings rates currently four and a half percent right and that's just at the moment we've had a spell of saving rates been far lower than that and in recent times you would have been able to get in very recent times a bit higher than that now using our long-term savings calculator over 40 years you'd need to save 750 pounds per month to reach your million pound pot to get a three million pound pot you need to do 2250 pounds every month to reach your goal in 40 years now what i would say about that that sounds absolutely unfeasible but a couple of like examples in here you could be talking a little bit here about your pension it's depending on your employer but they would probably match your contributions and you get the tax relief on it some employers will after a certain amount of time within a workplace will double contributions or add a bit extra on there so if you think about that that's quite good i'm currently saving not 750 pounds per month but 75 pounds per month alongside my wife so she's putting in 75 pounds per month as well in a big savings pot investment pot actually for our children and i've seen the effects of compounding of that already just over the last six years and how that mounts up so it's a i think that 750 pounds 2250 pounds every month is a lot of money 99.9 percent of people cannot stretch to that kind of level but it is important to even take baby steps it's probably not going to make you a million pounds but it is a good habit to get into now according to the experts in here as well it would take investing 1 500 pounds a month over 40 years to reach the three million pound pot so that's a little bit less and in an investment point of view they say about 500 pounds a month would make you a millionaire that's uh allowing for inflation and investment charges but you know as they say here your million or three million won't go as far in 40 years as inflation will chip away at your spending power over the decades but jason hollands uh from evelyn park let's say he's he's a um wealth manager he says alongside the effect of inflation and lifestyle costs the tax burden will also impact how wealthy you feel as it is net income and net wealth that matters when it comes to your ability to enjoy travel nice clothes dining out regularly and purchasing new cars as well as helping out younger family members and leaving enough for old age.

39:32Georgie Frost: With the tax burden at the highest level since the Second World War, many people who might on paper be high earners or have million pound ices and pensions won't be feeling wealthy. That's it for part one.

39:49Simon Lambert: I'm joined now by Blurrim Gashi of Charles Stanley Direct for our weekly Investing Explained feature. Leram, got a question here from a reader in two parts. I'd like to invest in gold in my ISA. How can I do this? And what is a sensible portion of my portfolio to put in it?

40:08Georgie Frost: Thank you for the question, Simon. Just answering the first one about how can I invest gold in an ISA. Now, you can't hold physical gold directly in an ISA, but you can invest in gold through physically backed ETCs or exchange traded commodities or funds that essentially track the price of gold. These can be bought and sold very easily like any other share and are widely available on most investment platforms that have a nicer. Now for the second question about what's a suitable amount, it really just depends on your goals and kind of risk appetite. Gold as an asset is generally seen as a store value rather than a growth asset as it doesn't generate income like shares bonds or property but that being said it can be a useful hedge against inflation or market volatility for diversification many investors consider allocating a modest portion say five to ten percent of their portfolio to gold it's important to tailor this to your personal circumstances.

41:11Georgie Frost: And also on that, it's also best to, it's best practice to rebalance your exposure during market upside and downside.

41:18Simon Lambert: Thank you very much.

41:21Lee Boyce: Welcome back. With speculation mounting about what tax rises the Chancellor might bring in in the autumn budget, as we mentioned earlier, the nation's financial advisors are having their work cut out, fielding a rush of questions from worried savers. But what are the most common concerns and what advice are they given? Lee, I imagine inheritance tax and pensions doubtless features rather strongly, but you've looked at six of the big, big questions. What are they?

41:50Georgie Frost: Yes. Harvey Dorsett, who does a lot of our financial planning stories, I sat down with him a little while ago and we were sort of freshened out some story ideas and the premise of this story was to speak to eight different financial advisors and for them to each give us the three questions they are being asked the most this year and then we aggregated kind of what they were saying to get the six most asked questions for all of those financial advisors they're in order in this story of how frequently they were asked and some of these were mentioned by every single financial advisor when it was just to get a feel of what people are kind of like most worried about and most thinking about now if you're using a financial advisor you probably do feel wealthy maybe not a million pounds wealthy or three million pounds of wealthy but you might do and you're right the number the number one question is how can i avoid the inheritance tax net uh advisors are seeing a deluge of questions about mitigating iht and then actually the second most asked question feeds into that very nicely because it's will my pension pot be an inheritance tax track now from uh april 2027 pensions are set to be included in iht calculations means more people will be dragged into having a potential iht liability by this and it's a key concern for for clients and actually we had a story this week suggesting that there's been a shift in habits again because i think shifting habits feels like the kind of term for our podcast this year shifting habits in older people gifting out surplus income and just making small gifts to family members especially children and grandchildren even charities and friends because they are concerned about how they're looming changes to IHD and it's going to drag a lot more people's assets into an inheritance tax kind of liability from under two years time now and i think the closer we get to that the more panic there's going to be and number three uh my first question is can i enjoy an early retirement again i think lots of people will have this on their mind um and again it will just depend on how well you have managed to save into the pension and how well you've been able to say save elsewhere is now the best time to invest uh with question number four and actually the reason why that was asked has been because of the tariff a lot of clients are mentioning to financial advisors about the tariff worries over the tariffs that donald trump uh was going there's lots of headwinds in investing but at the same time 3100 is at a record high and we've seen a few uh peaks and troughs this year but on the whole the kind of global markets have held up fairly fairly well given everything that's been going on number five is should i act before the autumn budget I always think that's one of those questions that you shouldn't try and preempt any of the changes.

44:49Georgie Frost: And actually, that's one of the comments we have from a financial advisor in here saying some clients try to preempt the changes that any government will make in a next budget. The best course of action is often to sit and wait until closest to the time. And actually, the last budget last year, you know, there were so many rumors flying around and people doing things in a panic, in a blind panic that didn't materialize that we argued on this podcast that there should be way less kite flying, for example, and more kind of concrete. No, we will not be doing this. And another example of that was the whole cash ice of shiasco.

45:24Just put it off the table.

45:26Georgie Frost: Just say it's off the table. and then actually lastly it was kind of one of those things where you try to write a story like this and you think how many people does this actually encompass but it was mentioned by quite a lot of the financial clients and that is will my business face a tax raid the last part of that is inheritance uh tax allowances for small business owners and farmers you know set to be slashed beyond the first one million pounds of combined agriculture business assets for inheritance relief is going to be reduced for half from april 2026 essentially creating an inheritance tax rate 20 percent and many business owners and farmers want to know if they should sell up or pass on wealth now or if they can find some other way to avoid their legacy coming with a huge tax bill attached of course when you read it out like that that makes a lot of sense um you know we saw the protests uh in the winter from farmers uh who were upset uh about this move um chances stuck to guns people are wondering what they should do next you know and time is running out georgie selling a business for example is a very complex uh state of affairs depending on what your business is the time is running out you know we are okay eight months away from april selling a business is i've seen it firsthand it's a lot of work and it's very difficult and it's a big big decision so they are six huge huge things that are being asked to financial advisor at the moment they are the six uh most common things that i think there should be some honorable mentions here of things that didn't make the cut and actually looking in our reader comments one of the big ones is how to afford care fees and how and how to fund your care because it is so expensive uh so so so expensive and it's only getting more expensive and it is a real drain and a suck on

47:23Lee Boyce: your wealth yep simon uh lee mentioned there about investing i can't let it go is now a good time to invest you know with all the stuff that's going on over in the states will he won't he he will

47:35Simon Lambert: is now a good time to invest that is a question that people always ask and always ask themselves and they ask it when things are going badly and they ask it when things are going well there's an old saying stock markets climb a wall of worry basically people are always worrying about stuff yes the market goes up if you're not in it you ain't gonna win it you're not gonna make those gains people were freaking out what we in august now isn't it so four months ago we were peak tariff freak out you know everybody worrying what happened trump introduced his paws market soared u.s stock market that had been written off by lots of people who's riding at all-time highs is FTSE 100 has been riding at all-time highs.

48:17Simon Lambert: Investors are doing great. Now the worry is over irrational exuberance and the return of the tariffs, which Donald Trump has brought back today in various forms. But what could he do next? Markets are getting some clarity in terms of, right, this is what the tariff is. This is what the tariff isn't. We know what you're getting. We know what you're getting. They're not as high as they were. They're still higher than they were before the start of the year. There is this taco trade, Trump always chickens out trade. As I've said before, I wouldn't bet on him always chickening out because the more people say Trump always chickens out, the greater the chances that at some point he decides to prove us all wrong and not chicken out.

48:54Simon Lambert: I wouldn't necessarily want to play a game of chicken with Donald Trump. You just never know what he might do. So I would be cautious. But the thing to do is to invest regularly in that case. You're most at risk if you stick in a big lump sum and then the markets suddenly tumble. And if you invest regularly, you do this thing called pound cost averaging. You're benefiting from the gains when markets are high, but you're getting to buy a bit more when markets are low. And you just keep going over the years and you allow your gains to compound. And then it's a way of getting rich slowly. I'd also just be very careful about being overexposed to some stuff and anything that you see going up lots and chasing gains and thinking yeah great i'll have some of that if you ever think yeah great i'll have some of that

49:39Lee Boyce: take a pause before you put your money in finally simon this is an interesting one reader question sticking with the whole rachel reeves tax raid theme that's sort of gone through this show i'm one of these i'm not this is the reader question i'm one of the people that will be adversely affected by the raid on unused pension pots. Currently, this change will mean an additional inheritance tax charge of about£270 ,000 for me if I died. I have been looking at the gifting rules and the sums that you can give away are measly. They're another thing that haven't changed, aren't they? £3 ,000 a year or unlimited£250 gifts, but only one per person.

50:23Lee Boyce: However, If I can gift£250 free of inheritance tax to as many people as I wish, could I do that? And then those people give all that money to my two daughters. So could I gift a total of£100 ,000 to 400 different people? And they each in turn make£250 gifts to my daughters, giving them£50 ,000 each and thus avoiding inheritance tax. I don't know 400 people that I would do this with. But Simon, an interesting question.

50:56Simon Lambert: Brilliant question. Best question of the year. I take my hat off to the reader who sent this into our inbox. No, you have not come up with a cunning ruse to avoid inheritance tax. As I suspect our reader may have thought, it was probably unlikely this was going to work. we'll set aside the logistics for one moment which are tricky um ranging from those uh 400 people are probably going to want to be paid a little bit of a cut for doing this aren't they you're not just going to give them 250 and then they give the 250 back you probably have to pay them all at least a fiver um and and even then is that enough money to get someone to do something even if it's something really simple you know ignoring the bit where once you've sent someone 250 pounds you have no control over whether they send that 250 pounds back to where they're meant to have sent it to um i suppose you could try to get them to sign a contract but we're seeing the expenses of this ruse climb aren't we um or you just expect a certain amount of wastage of people going yeah i mean it would be nice to earn the five pounds but i'll keep the 250 thanks and you're probably not going to come after me for it in court um but leaving aside those logistics unfortunately as our expert a mr david denton of quilt achievia explains unfortunately no the uk introduced the general anti-abuse rule in 2013 and this is designed to target those taxpayers who avoid paying tax in ways that are not in the spirit of the rules despite some aspects being potentially legal abusive arrangements can include as a series of pre-ordained steps where HMRC would look at the overall effect of the series or combination of transactions in order to identify the real purpose.

52:45Simon Lambert: The GAAR applies to a number of personal taxes including inheritance tax so if enough tax was at risk it could come into effect here given there is a pre-planned element and it involves a number of people. I have an interesting story on this involving the sale of our first flat where it turned out that the buyers wanted to it was a couple one of them was going to buy the flat office and then sell it instantaneously to the other one for a nominal sum therefore avoiding stamp duty the way this worked was and this was a scheme I believe was marketed to people at the time is you did this you notified HMRC of what you were doing and that you therefore did not owe them any stamp duty and if they didn't come after you for the stamp duty I believe it was in a within a year but I might be wrong here because you had told them what you were doing you'd notified them and you weren't just like you know hiding it they didn't come after you for a year and you didn't have to pay the stamp duty and these schemes would indemnify people against it anyway our solicitor wasn't having any of this even though actually even though actually she would she wouldn't have been implicated at all in it that was my argument i was like why is it matter to you it's not your responsibility and like at this point i was like is this going to crash our sale in the end you know the people who were buying decided not to do this and it all just moved along and the transaction happened as normal but that's the kind of thing that this this rule would catch out little cunning ruses like that that actually may possibly before 2013 you might have been able to get away with this although as i said logistics

54:30Lee Boyce: difficult so in some it's the spirit of the law that also counts yeah it does and this is to try

54:37Simon Lambert: to catch people who are doing things that are quite clearly wrong and quite clearly designed to evade tax or avoid tax in a way that looks so evading is illegal avoiding is not but avoiding tax to the level that it becomes evading i know but there's got to be no one at hmrc that if

54:56Lee Boyce: anyone actually manages to pull this off would just be like high five you for the effort if you get that over the line we'll send you like a special badge or something yeah do you know what i mean order of the year yeah kudos to you for that effort yeah you're not just like some someone

55:11Simon Lambert: who just did it in a classic very wealthy move your money way you you made a real effort exactly

55:17Lee Boyce: Exactly, exactly. Do you think how much you'd get paid for doing that sort of work? That's a lot of work.

55:21Simon Lambert: Yeah, like in my kids' school reports where you get the score, which is done in numbers now rather than letters for achievement, but then you also get the attitude to learning one. And it's actually, you say to the kids, the attitude to learning one is more important. A plus. You're right. And in this case, the attitude to tax avoidance is very high.

55:41Lee Boyce: Committed, committed. All right, Simon, start of the week, please.

55:45Simon Lambert: All right. 1 ,000%. That is how much Rolls-Royce's shares are up since the new boss, Turbo Tufan, as he's known, took over a few years ago at a point where he said Rolls-Royce was a burning platform. The share price had crashed. They'd had the COVID problems, the pandemic problems, the lockdown problems. Shares were almost priced for it going bust. If you had invested at that point, you would have made an 11-fold return on your money.

56:20Lee Boyce: All right, that's it for this week. Thank you, Simon. Thank you, Lee. Thank you for listening. You can keep up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app, of course. And if you have any comments or questions for the team or anything you'd like them to look into, Simon?

56:36Simon Lambert: You can email us at podcast at thisismoney.co.uk. Can you come up with a tax dodging ruse to top the one that we just talked about but it has to be that it could potentially work okay creative yeah creative but not ludicrous all right those are the rules uh and we're not advocating doing this no just asking us the question so we can tell you that you cannot do it and just be 100 clear to anybody who's listening okay we're not condoning tax evasion or tax avoidance we are just saying send us your questions and we will tell you that you are not allowed to do this or if you have anything else to tell us then please email us at podcast at thisismoney.co.uk or come to thisismoney.co.uk forward slash podcast to leave your comments in the reader comments and join the debate and if you like our podcast why not rate us wherever you found us it helps other people find us too take control of your finances with charles stanley

57:31Georgie Frost: direct invest save coach or plan using technology where it's helpful and people where it matters Our website and app make trading cost-effective and flexible, but we're more than just an online investment service. We're here for you regardless of your financial needs or if your life takes an unexpected turn. Your finances, your way. Take control today with Charles Stanley Direct. Sign up now.

57:59Simon Lambert: Investment involves risk.