That’s never going to happen I hear you cry? Maybe it won’t maybe it will. But let’s just imagine that it did and this article is by no means a political rant. It’s far more important than that and I might just change the way you think.

So the terrible day comes and yes, next week, next month, or next year the new tax rate for basic rate tax is raised from 20% to 40%. So what do you do? I’ve thought about this for a while and I believe most people would react in one of the following ways.

  1. You decide to emigrate to a new country where the tax rate is lower
  2. You decide to start a campaign and take to the streets in protest
  3. You decide work is not worth the effort and take a job earning less money
  4. You decide to stop work altogether and live of savings or state benefits
  5. You decide to go to your local MP and tell him this has to change

Buts let’s stop for a moment and look at these options one by one.

How practical and easy would it be to leave the country? How easy would it be to move your family to a new country altogether, find a new career or a new job. Find new schools for your children, sell your home here, buy a new home in a new country and even learn a new language and anew culture. Not so easy is it?

So you decided leaving old blitey just isn’t going to work, so you thought you’d turn your hand to becoming an activist. Firstly I’ve never been an activist, but from what I can see it may work but it takes a very long time to get a result. The powers that be just don’t move quick enough in this situation.

You’ve become and activist, but it takes time and you’re really angry, are so opposed to the new tax rate that you decide that instead of working 60-70 hours in your business you are only going to work 35 hours, so that you earn half the money. But you quickly realise that the mortgage won’t get paid and little Jonny can’t go to football on a Saturday and Isabel can’t do ballet class anymore. The Mrs. is now really angry and we haven’t even considered what she will have to go without. So that didn’t work either.

But you are still really, really angry and late one Friday night after a few too many, you decide to wind up the business altogether. That’s it, you’ve had enough and unemployment is now your new career. Unimaginable chaos is likely to follow; your wife has totally hit the roof and left you, the kids are crying and to cap it all the mortgage company say they are having the house back. Not to mention that you probably wouldn’t get state help as you deliberately made yourself unemployed.

Now that you have lost your house and your wife thinks you are totally mad and left you, you final take to your senses and decide….. my local MP is going to get a piece of my mind and is going to sort it out. Oh yes he is! But he is the one helped cause the problem in the first place!

“I’m sorry sir” he said “It’s just not possible; it’s what we have to do to keep the economy in good health”

 

So eventually come to your senses and you begrudgingly accept the new status quo, after all you have tried everything you could think of and probably a few more besides. You see the reality is if this did happen, you would most likely after a few months of adjustment, get used to it. You’d have to trim back here, trim back there, buy a cheaper car, go on fewer holidays, eat out less. But in the end you would have to find a way, you would just have to.

Now let’s imagine that instead of the tax man talking 20% of your income it was something else. In fact you decided that investing for your future was so important that you just had to save 20% every month and every year. What difference would that make to your future? How would you feel about your future? If you did save 20% of your income for retirement, maybe the thought of retirement and the prospect of working forever would not be all that scary at all.

I can tell you this, because this is the path I have chosen. Sure I have to go without thing’s I would like to have today, but that is just life. And as my mother regularly tells me, “life is full of choices”. We either make choices just for now or for both now and in our futures.

Taking retirement seriously is a challenge for all of us that I can assure you. I am very much on that journey myself.

Always consult a qualified financial adviser before making any tax or investment decisions. The above article is only for guidance and should not be taken as advice. If you would like to talk to me about getting your future investments on track please contact me.

Contact Martin Dodd on 01902 742221 or email him at martin.dodd@miadvice.co.uk if you would like talk about money issues.

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