Money and taxes aren’t the most exciting topics, but understanding how the UK tax system works can make a massive difference to your financial health. Many of us work hard, earn a good salary, and pay our taxes without much thought—only to find that a significant chunk of our income disappears before we even see it.
The reality? Taxation in the UK is set up in a way that often penalises those who work the hardest while offering incentives to those who understand how the system works. If you’re in your 30s, 40s, or 50s and looking to build a strong financial future, this guide will help you make smarter decisions about work, tax, and business.
Who Really Pays Tax in the UK?
The tax system is not as straightforward as it seems. While there’s a common belief that billionaires and big corporations avoid paying tax, the reality is:
- The top 1% of earners contribute 40% of the UK’s total tax revenue.
- The top 10% pay 70% of the total tax collected.
- Middle and upper working-class earners—people who’ve worked hard for decades—often get hit the hardest.
So, while headlines often focus on billionaires “not paying their fair share,” it’s actually the hard-working business owners, professionals, and higher-rate taxpayers who are paying the bulk of the tax bill.
Why the Hardest-Workers Pay the Most in Tax
If you’re earning between £50,000 and £125,000, you might feel like you’re getting squeezed from all sides. That’s because:
✅ Income tax rates increase sharply once you hit £50,000.
✅ Between £100K and £125K, you effectively pay 60% tax due to lost tax reliefs.
✅ National Insurance (NI) has increased, making employment more expensive.
✅ 25% Corporation Tax makes it harder for businesses to grow.
At the same time, some people are earning thousands tax-free—like ‘professional beggars’ reportedly making £200 per day without paying a penny in tax. Meanwhile, 10,000 millionaires left the UK last year to escape high tax rates.
How to Keep More of Your Hard-Earned Money
The UK tax system rewards business owners far more than employees. If you’re serious about building wealth, understanding tax is as important as working hard.
1. Consider Starting a Business
Running a limited company allows you to:
🔹 Pay tax in arrears instead of at source (giving better cash flow).
🔹 Deduct legitimate business expenses (like laptops, subscriptions, and travel).
🔹 Choose how and when you pay yourself to lower income tax liability.
Setting up a company is cheaper and easier than most people think—and even a small side business can make a difference.
2. Work Out What You Can Deduct as Expenses
Many expenses you already pay for personally could be legitimate business expenses, reducing taxable profit:
✅ Work-related travel
✅ Home office costs
✅ Professional training and education
✅ Subscriptions and software
✅ Business meals and networking events
This means less of your money goes to tax, and more stays in your pocket.
3. Be Smart About Income and Pensions
✅ Salary vs. Dividends: Instead of drawing a large salary (taxed at 40-45%), business owners can take a lower salary and top up with dividends, which are taxed at lower rates.
✅ Pension Contributions: Company pension contributions are tax-efficient and reduce corporation tax.
Even if you’re employed, setting up a side business and using these strategies can help reduce your tax bill legally.
Why High Taxes Hurt the Economy
You might think, “Well, we all have to pay tax—it funds the NHS, roads, and public services.” And that’s true. But when taxes are too high, it drives business away and reduces incentives to work harder.
For example:
🚨 Higher Corporation Tax (25%) is forcing businesses to move abroad.
🚨 High Income Tax (up to 60%) discourages people from earning over £100K.
🚨 Employers face higher National Insurance costs, making hiring more expensive.
In contrast, countries like Dubai are attracting entrepreneurs with low tax rates and better business incentives.
Final Thoughts: Work Smart, Not Just Hard
We all want to provide for our families, enjoy life, and build financial security. But relying on traditional employment alone means paying more tax while others use smart strategies to keep more of their money.
Although the UK tax system often penalises hard workers, understanding how tax works and making strategic financial decisions can make a huge difference.
You don’t need to be a billionaire to use these strategies—starting a small business, managing expenses, and structuring income wisely can help anyone build wealth more effectively.
👉 Want to hear more? Check out Rob Moore’s podcast episode on UK tax and wealth: https://omny.fm/shows/the-money-podcast/488-money
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