I have been watching Robert Kiyosaki’s Rich Dad videos on Youtube. Straight up I want to say that I don't particularly subscribe to the stuff he says (I agree with some of the general concepts about getting a financial education, understanding legal tax efficiency steps, and motivational aspects if nothing else), but I am racking my brain trying to work out how he proposes reducing personal tax liability to get money out of a business. I understand his theory behind reducing CORPORATION tax liability through increasing liabilities on depreciation, debt interest on mortgages, capital re-investment costs, etc.
But how does he propose you reduce your PERSONAL income tax liability to virtually zero if you are resident in somewhere like the UK? Other than moving to a tax haven to reduce personal income tax (and if you did that, then why the need to hike up business liabilities to reduce corporation tax if you can easily take money out of the business through wages and dividends since you are living in a low tax haven).
I also understand the usual stuff like being sharp in claiming all the personal allowances going (from capital gains tax allowance to whatever else), but even then that would only reduce tax burden for a big swinger. Even I could give plenty of tips to others on that stuff for UK residents, such as these below:
Many have vaguely told me stuff like the following:
A practical example to frame the answering of this question ... Say you are running a software consulting firm turning over £500k+ per year and you need to pull anything from £50k to £200k per year out of the company, on a practical level how do you suggest a conventional middle class person can lower their personal income tax bill to virtually zero (presume this personal is already in Investor quadrant Kiyosaki is talking about, using investment debt in the business) or restructure their business and cash flow to maintain the lifestyle of someone on £200k+ personal income per year without incurring benefit-in-kind personal income taxes? I’m open to keeping lots of these perks like cars, houses and boats (chance would be a fine thing with the latter) within the company for discrete personal use, but in the UK I have always thought these to be benefits in kind. Maybe I am very grounded in some of the conventional ways of thinking. Kiyosaki's books and videos have a LOT of high level theory, but seem to lack hardcore practical examples of sample income statements, balance sheets, cash flow statetments, and methods to take money out of a business in a tax efficient manner.
I’d really value examples and scenarios backed up with some figures. Thanks!
But how does he propose you reduce your PERSONAL income tax liability to virtually zero if you are resident in somewhere like the UK? Other than moving to a tax haven to reduce personal income tax (and if you did that, then why the need to hike up business liabilities to reduce corporation tax if you can easily take money out of the business through wages and dividends since you are living in a low tax haven).
I also understand the usual stuff like being sharp in claiming all the personal allowances going (from capital gains tax allowance to whatever else), but even then that would only reduce tax burden for a big swinger. Even I could give plenty of tips to others on that stuff for UK residents, such as these below:
- [Genuinely] Give yourself, your partner and close family senior positions within the company
- Decide what is a very good salary for each of the positions
- Pay 50% of that amount as employer pension contributions for each
- Pay the rest as traditional salary
- Let each work from home some of the time and pay them the appropriate allowances
- Make full use of trivial benefits, Christmas party allowances etc
- Assuming married couple 2 x £40,000 pension contributions from company, 2 x £12,500 personal tax free allowance. 2 x £12,300 capital gins tax allowance. total £129,600.
- Any gains within the pension fund are tax free until withdrawal. Tax will be paid on 75% of the pension when withdrawn
Many have vaguely told me stuff like the following:
- Focus on not earning any personal income, and that the trick is to not earn any personal income while "living like a King", or earn very little to reduce income tax and national insurance payments.
- The whole world is just one huge tax dodge. That the rich are international that "When it comes to financing the whole project, the money is neither here nor there. It's in Bermuda." That just leaves the middle classes who are wage earners.
- The rich don't pay stamp duty on their houses, they don't pay VAT on the machines they need to keep the grounds tidy and keep the mansion in good repair, they don't pay income tax because they have no income, they don't pay corporation tax because the money is not in the UK, and if they have a company here in the UK, the holding will be a long way away, via a couple of other holdings that all are well outside the jurisdiction of HMRC.
- People like Kiyosaki are just selling courses in snake-oil farming (I don't necessarily believe this - some of his tips are decent, and I certainly believe in getting a solid financial education)
- You do not have to go to all the extreme of setting up holding companies in Bermuda or Jersey. The whole of the EU is littered with giant and perfectly legal tax-dodges so enormous it would make your head spin. And the whole Brexit thing is just going to make matters worse - or better, depending on whether you are a dodger or a dodgee!
- In the UK, you can earn from forests tax-free, in France from farming, but the doozie is German property! Earn pots of money (if you can!) and then invest in property. Your friendly German tax advisor will explain what to do next.
A practical example to frame the answering of this question ... Say you are running a software consulting firm turning over £500k+ per year and you need to pull anything from £50k to £200k per year out of the company, on a practical level how do you suggest a conventional middle class person can lower their personal income tax bill to virtually zero (presume this personal is already in Investor quadrant Kiyosaki is talking about, using investment debt in the business) or restructure their business and cash flow to maintain the lifestyle of someone on £200k+ personal income per year without incurring benefit-in-kind personal income taxes? I’m open to keeping lots of these perks like cars, houses and boats (chance would be a fine thing with the latter) within the company for discrete personal use, but in the UK I have always thought these to be benefits in kind. Maybe I am very grounded in some of the conventional ways of thinking. Kiyosaki's books and videos have a LOT of high level theory, but seem to lack hardcore practical examples of sample income statements, balance sheets, cash flow statetments, and methods to take money out of a business in a tax efficient manner.
I’d really value examples and scenarios backed up with some figures. Thanks!
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