Debt is like minor toothache; you can get worryingly used to having it but will rarely forget it’s there. And for increasing numbers of us in the UK, it’s how we fund our day-to-day lives. Yet, no one talks about it, which is partly why being trapped by debt is such a lonely, miserable, and shameful experience.
As a writer of two best-selling books, people assume I’m well-off. Hailing from background which could comfortably be described as “deprived”, I came to enjoy the feeling of being regarded as successful and prosperous. But behind the scenes, I’ve struggled to keep my head above water. The truth is, over the last few years, like millions of others on this God forsaken little island, I’ve been caught in a web of financial adversity.
I am well aware that my relative privilege as an author and broadcaster may render my difficulties laughable in some people’s eyes. How could someone off the telly have the gall to complain about financial adversity, during a cost-of-living clusterfuck like the one we are living through in the UK. Of course, the key word here is “relative”. Ten years ago, my main problem was being unable to make a carry-out last until the off-licence opened at 10am. Today, keeping up with the taxman is the central dilemma of my existence.
I was caught out by a particular form of tax. The one self-employed people pay. Many years ago, Gordon Brown, in his wisdom, changed the rules around when and how this tax should be paid. When you work for yourself, your tax is not deducted at source, so you are responsible for setting aside the funds throughout the course of the year, and paying what you owe in January. Brown decided self-employed people should not only pay what they owe, but also an additional half of what they were projected to earn the following year — this is Payment on Account. It means that if your tax bill is £15,000, then you have to pay £22,500 by January’s end and then another £7,500 the following July. And if your tax bill is £30,000, you’re up for 45k, then 15k six months later.
But what if, like me, you weren’t aware of this? What if nobody told you that this is how it works? Well, then, you’re fucked. Here’s how it goes: the tax bill comes in, plus the additional “payment on account”, and you realise you haven’t got enough to cover it. And suddenly, the first genuinely great year of your entire life morphs into a terrifying nightmare.
Now, add a random calamity such as Covid, lockdown and an economy in absolute freefall. You emerge from the first high-earning year of your life, only to discover you have the tax liability of a well-paid person, with no capacity to actually earn the money required to settle your bill. And what’s worse, every pound you do claw in is itself taxable. So basically, the money you are making to try to pay the tax becomes your next tax bill. And the more you try and earn to offset this, the harder it all gets. Yes, it’s a first-world problem, but it’s a problem nonetheless.
According to Money and Mental Health, over 1.5 million people experienced both difficult debt and mental health issues in 2023. Money and Pensions Service found that as many as 24 million people don’t feel confident managing their money. And according to the Financial Capability Survey, only a third of those people in debt receive help. One of the hardest things is not being able to talk about it. I couldn’t talk to my working-class friends or family because I feared they would resent me, given the sums I was dealing with. Plus, it seemed arrogant to complain given many of them are still living in genuine poverty. And I didn’t know anyone with money well enough to get into any real depth with them about something so personal either.
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SubscribeThank you so much for sharing your story. It’s all too common and very “not spoken about”
For some reason we’ve all been taught to keep money a private matter and while I somewhat agree in the face of discrepancy, it leads, largely to financial illiteracy. We learn so much from other people when we have conversations.
My husband and I worked hard to get out of debt (except for our manageable mortgage) we don’t even have a credit card…
The banks don’t own us. We have no financial stress (we also don’t have ski holidays in France…sadly)
It’s a liberating feeling. If we don’t have the money we can’t buy it. Pretty simple
I’m thankful for the work of Australian Author and Economist “Scott Pape” and his book the Barefoot investor. It’s been simple to follow, entertaining to read and empowering to act on his achievable and safe advice.
I wish I had learned this when I was 15! And it should definitely be taught in schools.
Yeah. Strange that it isn’t…
I was in high school a very long time ago and still remember my senior year economics teacher. She found clever ways to teach us how to navigate the sea of earnings and taxes. And most importantly how to budget. I am forever grateful to Isabelle Boteler for teaching me how to be an economic adult.
Going off at a tangent but the name Boteler has been associated with education in NW England for over 500 years. Wonder if she was a descendant of Sir Thomas.
That’s a rare brilliant teacher.
This so resonates and I hope some readers, however few, take heart from the story. There is a way out.
We got in a pickle at the end of the Noughties with the crash. Working very hard, small business, money coming in, but Corporation Tax had been paid out of the next years income! Then the crash and 50% of the income disappeared. This took until 2012 to sort with an arrangement with HMRC.
Since then we have run on a budget irrespective of actual income to the company, built up reserves, put next years tax to one side etc.
We are siting facing some financial stress at the moment, but it is just an issue to solve, a reduction in income temporarily, some cost cutting. The big stuff is covered, it will pass.
What a dreadful situation. I bought the author’s book back on release so it was sad to hear where it all ended up. Our tax system brutally disincentives success except for those in the black economy or the ultra high net worth who use elaborate off-shore structures to pay essentially nothing at all. I am glad to hear the author is in a better place and wish him well with his book, which I will consider buying if it is anywhere near as good as Poverty Safari.
Remember the great words of HMG on the duty of citizenship:
Go to work, Pay your Taxes, and Shut Up; You Miserable Tax Chattel.
haha
But someone has to pay for those bombs and destroying Ukraine and Gaza, someone has to pay for those Migrants legal aid, someone has to pay for replacing incorrect monuments…. Government borrowing and debt alone cannot do it, they need your money too. haha….
Exactly.
So will I.
As an accountant, I am bound to say that Darren should have sought professional advice. The tax system should be simpler, but there are some things that it is better to engage someone with the right skills – which is why I ask plumbers, electricians and IT guys to sort out issues that arise.
I agree but you have to admire his eventual DIY method.
Not really. He appears to have caused himself a huge amount of unnecessary stress.
But it’s so staggeringly honest.
“Caused himself”. What an absurdly unsympathetic comment and I wonder how consistent you are with that judgement.The guy grew up in the Glasgow estates with nothing, had a mother with a terrible alcohol problem, etc!.
This sort of problem isn’t restricted to Darren McGarvey. Apart from anything else, the tax system is ludicrously complex. We should not all need to employ tax accountants.
The tax system is not the only thing that is ludicrously complex. So is plumbing, electrical,HVAC, permitting, building materials and a host of other thing that used to be commonly understood and explained by observation and common sense. Let’s face it …. we are all predators of one another on all levels. We are still in the jungle … only now it’s a concrete one. What a conservative fairly criticizes a liberal for these days is the complete failure to account for an understand human nature and human motivation.
But in the end … the strong prevail and the weak succumb.
Like the poor can afford an accountant.
Anyway what is the reason for making the Tax and legal systems so complicated that one has to hire a person with a university degree.
It’s almost like those rules were written by the professional classes themselves.
Ha ha,must be to make it worth having a uni degree
Uni degrees don’t teach this stuff unless it’s accounting or something
The people who plan them can all afford an accountant – the same people who think £75,000 is adequate compensation for years of unemployment, ‘debt’ and poverty as a result of the Post Office scandal.
He was self-employed and earning a reasonable amount of money so not poor. The government makes it ‘easy’ for employees by getting their employers to send the tax directly directly to them. If you are self employed or own your own business you have to do it yourself or pay someone else do it for you. Can’t say that I have much sympathy for him.
I am bound to say is that he could grow up – or at least move up a step in culture, now he seems to believe he has a foot in it, and stop the very grating use of Fu** just tossed out pointlessly –
‘‘1 Corinthians 13:11-13King James Version11 When I was a child, I spake as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things.”
Time to see you are not with your stoner friends – and act the part you are moving into, the world of grown up conversation.
You awful classist excuse for a human being!
# Troll
It’s a shame you felt you had to display your strong feelings of disgust to a fellow human being you feel is beneath you. That said, I guess we all have freedom of speech….so I take delight in saying…
F@*K the f@*k off!
You tell him. I agree.
I’m not sure why the use of the f- word is necessarily obligatory for or associated with working class people! Its constant use grates on me, but Darren McGarvey used it once here in the well known and punchy expression “fucked up” which is widely used by his supposed social betters.
Trouble is a lot of those upmarket folk use that very language both in their public work and in private conversations,yes,they do it with irony,they intend it with irony,funny ha ha,adds a bit of piquant flavour. If an actual workman did it they’d all stare him out of countenance. And most workmen are actually cultured too. Just because you can erect scaffolding don’t mean you can’t also read James Joyce.
“should” as in would have been wise? I agree.
“shouldn’t need to” as in tax system should be so simple it does not require expert, expensive, advice.
I see what you’re saying but I think his method was more honest. He went out and cleared the debt. He didn’t pay some one clever with numbers to find him a sly trick. (Sorry). But I hope he has now consulted experts so as to learn “the rules”. Have a “road map”.
That’s the absolute first thing I thought of upon reading this excellent piece. Lawyers and accountants can save us a lot of money and stress for what we pay them. However, the lesson Darren learned is probably worth more than what he would have saved if advised by an expert.
Well Howard …. IT does not fit in with plumbing and electrical. Comparing IT and electrical is like comparing the light bulb with a candle. IT is in a category by itself and we are in a new age.
As a resident of Glasgow, it’s great to see Darren McGarvey on Unherd. Excellent article all round.
1)You didn’t seek advise 2) you learnt that social services cost money and that tax payers pay
That’s how I felt reading the article initially (and how could he not have understood something so basic?). The first part did come across very much like one of those “woe is me, I might have to take the kids out of private school” articles we see so often. However, he does then admit his own fault and responsibility for the situation, plus he does acknowledge the need for everyone to do their bit paying taxes, so I softened a little. I might even buy his new book!
I find it strange that financial literacy is never taught at school.
As opposed to the social justice concepts that heaped on kids’ heads and do society little good in the end.
Our education system is a factory for churning out useful idiots. Sheeple who will obey, pay their taxes without questioning if they’re fair or where the money goes, and, above all, not be equipped to navigate their way through a Kafkaesque bureaucracy of rules, regulations and constraints designed to keep them in the dark.
It’s said that everyone breaks on average three laws a day without even realising it. Hardly surprising with a tax code which is so dense even tax advisors have a hard time keeping up with it. Each Chancellor has to keep tinkering with it, to leave his mark and to nudge us in the politically correct direction of the day.
Financial literacy? God forbid the plebs should understand how the financial services industry manipulates them. Debt is good!
While I think your language about education is a little harsh, as a schoolteacher, I have to accept that you have a point.
Read Caplan’s The Case Against Education
I think we all appreciate that teachers do as they’re told and teach accordingly. At least nowadays.
I remember getting letters from the dreaded HMRC 3 years on the trot telling me I had underpaid tax. I didn’t understand how this could be, as I have always been in the PAYE system so have no control over what to pay. So I lodged a formal complaint of maladministration with HMRC and in the end they let me off paying the shortfall. They took ages to look into the complaint though. In the end, it turned out that they had neglected to change my tax code when I informed them of a change in circumstances. Instead they initially tried to blame my pension provider for not activating the new tax code, but they had never received it. I’m hopeless with numbers, but I can tell when somebody is trying to pull a fast one on me.
What you write is just wrong. If you have children then you have some responsibility to round off their education, schools should only be responsible for a certain element of learning. Tax codes are generally right and simple for most people. Yes the rules are ridiculously over detailed but they don’t often affect most of us. But if you have some facts to confirm how the state is trying to manipulate us then it would be useful to know. In the right place, debt is essential, try buying a house without it.
It’s almost as if the lack of teaching is intentional, a version of bread and circuses. Keep their minds occupied with the oppressed/oppressor narrative and they won’t pay attention to how they’re being screwed.
Which part of the curriculum is this? Did you get your information from a teacher or elsewhere?
It is a legal requirement to teach Financial Literacy in Schools (In England at least, not sure about the other UK Nations)
There is a vast gulf between teaching something and teaching it adequately and effectively.
It would be interesting to know how it is framed and set out then. Maybe I can Google for more information. I hope they teach the kids not to trust Banks now that Bail In is a thing l. Most adults don’t know either. Google it.
It is taught but the topic is so complicated and dull, I doubt it means much to students.
I had no trouble understanding that debt was expensive but that didn’t stop me over spending for years.
The particular topic; dealing with HMRC as a self-employed person (even as someone on PAYE) is tedious and difficult.
I believe (forlornly) that the only way is to make the tax system much simpler and for governments to expect to live with much less money.
Back in,yikes,1969,as a 14 year old at school,one teacher in class,might have been English,she was maybe in her late 50s,she TOLD US what teenage girls spent their pocket money on. I remember how much I resented that.
I didn’t say anything. She told us girls your age but pop music records,Jackie magazine and make up. Some of the girls agreed they did buy those things but I don’t think they meant exclusively or that was the most important items in their life. I said nothing as I didn’t buy those things. I didnt have pocket money as I recall but I thought if I said I didn’t it would be yet another mark of being the class freak. But see my cohort back then were continually being subtly guided to waste our resources,by tv etc. I was twice unlucky in that I lived in a home influenced by the more acetic (ie weird) Christian idea of Blessed Holy Poverty. Even having any money (surplus to paying necessary bills made you an evil person). So I can say from true experience that Poverty is not Blessed or Holy and the wisdom it confers is to get the Hell out of it.
I find it strange that financial literacy is not taught by parents, family or friends or even inherently understood. Yes I know all the noise that will produce, multi generational issues etc etc . But we are not talking about obscure finance here, we’re talking about earning money and paying tax, or borrowing money and paying it back or buying things and paying for them. Perhaps it’s a symptom of the way we live and develop now. The world is more complex for sure, yet it’s easier to get into debt. But considering paying tax as ‘a punishment for success’ is naïve beyond belief. Especially from someone who in this article is also calling for more support (from the state) for people in debt or in other difficulty. I’m sure people will think this uncaring but there are so many absurdities in this article. If you can write a book you can deal with HMRC both difficult in their own way.
I agree. Ive been thinking about this recently. I’ve had a couple of tradesmen say to me in the last few years they wished they had been taught how to handle finances at school.
I was recently in conversation with someone who had been turned down for a rental property they wanted to move into because of outstanding CCJs. The increased rent they would have to pay over 12 months would clear them easily. It hadn’t occurred to him to rent a cheaper place for that time for the opportunity to be free of the debt in a year.
My sister and I consider ourselves really lucky that our parents drummed it into us to live within our means and that mortgages were the only debt “safe” to take on.
As others have noted, financial literacy should be taught in school. There should also be high level lessons on how the economy works, how shares work, what a pension is, how a mortgage works. It’s bonkers everyone complains about those 1%ers but never learn how it is they make money (I’m not suggesting everyone will become billionaires but people refusing to invest and leaving it all to their shitty company pension alone isn’t making them richer)
I do like the authors can do attitude – I find it utterly depressing how websites like Martin Lewis’s is completely focused on using only the funds you have (so those in debt have to live like paupers). Where’s the optimism and risk taking to MAKE money rather than save it?
Finally I appreciate the frankness of this article, for various reasons I myself have been in debt my entire working life, it is like toothache…I live fine day to day but it needs sorting, or it will be a major issue at some point. I too am looking at growing some money and not just cutting expenditure to a meagre existence. Thanks for the read!
Being required to pay tax on money you have not yet earned (or may never earn) is a monstrous imposition. Presumably this tax was a product of Gordon Brown’s socialist bigotry and antipathy to the self employed.
The article is incorrect on this point. Self assessment, including the liability to make payments on account was introduced by the previous conservative government. So save your ire for Margaret Thatcher and John Major.
Indeed, and that can happen, but that is not the case here. This is still about paying tax after you have earned it.
Many people ‘benefit’ by having their tax taken by their employer from their pay as earned (PAYE) and so don’t have to worry about it too much (but they should still keep an eye on what is going on – wage/salary departments and HMRC do make errors).
Self employed people don’t; they have to pay their tax in the following year after earning it and if they no longer have the money to do so because they did not put it aside at the time, then that is the situation described in the article. The introduction of ‘payments in advance’ brought forward the due date for payment, but it is still the case that you are paying tax on earnings earned, not on future earnings.
However the key point is that the payments are based on estimated earnings not actual. So if your earnings fell significantly then the estimated amount due can be a very large proportion of your actual income and incorrect. As some have pointed out you can apply to have the estimate reduced to be in line with what you are actually earning that year, but you do have to be informed to know this fact and many young people, small businesses etc do not know this.
Im not sure you are correct. The tax isnt paid up-front, it is an estimate of what you owe at that time based on previous earnings. I think it may have been introduced to smooth out tax returns across the year rather than people having 9 months to pay for previous year. It isnt difficult to divide your tax bill by 12 and put that amount aside every month. There will he no surprises then. It is only bringing the self-employrd more in line with PAYE.
Governments are as sneaky and inventive as any phone scammers in finding ways to separate you from your money.
Not to sound too Ayn Randian but governments and scammers alike don’t actually generate any money, so they have to get v good at theft! No, I’m not suggesting we abolish all taxes…but an overly complicated tax system is not to the electorate’s benefit and entirely a nice situation for HMRC and the accountancy industry.
You sound very Randian. Government is a sine-qua-non of a successful country, economically, or how ever else you measure it. A private business on the other hand is perfectly capable of thriving in the darkest of places, and for the darkest of reasons.
Wow. The tin-foil is strong in this one.
Is it? Far less ice cream is sold in Siberia than in Spain, and any government could conceivably ban the sale of ice cream.
COVID shutdowns wiped out thousands, at least, of businesses, and in the US “small business relief” was often stolen, and funds depleted, before shuttered businesses could even apply.
Private businesses only exist if they provide something people want or need, at a price they’re willing to pay. They’ll close otherwise.
Governments can exist for centuries, have a long history of providing things few people truly want or need, at prices (taxes) governments themselves often set. They allow no competitors, are often unaccountable, and never go fully bankrupt.
Say what you’d like about Ayn Rand, but she emigrated to the US from Stalinist Russia, quickly found employment, worked incessantly, and paid huge amounts in taxes.
This likely explains most of her weltanschauung.
She also died poor, reliant on welfare. If only she’d written another book forgoing the sophomoric, false dichotomy of govt vs business. As it is, wowed by the USA and horrified by USSR (perfectly understandable in both cases), she wrote the book that she did, and encouraged a generation fall for the same trap; and thus say silly things – such as to make direct comparisons between scammers and government; taxes are theft; government is the problem/business the solution.
Strong rejoinder.
Darren I admire your grit in taking responsibility and sorting out a difficult situation.
The first time HMRC insists you pay part of next year’s taxes in advance is tough for most of us (and not money that you actually owe, technically, because you haven’t yet earned it).
In practice it’s a way of enforcing savings in advance to pay your tax bill so ought to make things easier in future years.
But I believe there is an option on your tax return to request that your forward payment should be reduced if you can give a good reason (such as having had one-off, unrepeatable income in the previous year).
I have no personal experience as to how HMRC would respond but others may be able to contribute their experiences and it may be useful to know for someone finding themselves in your situation this January.
I do think it is potentially very unfair that the taxman can take money from you before you have actually earned it. It’s the same for people who may have an inheritance tax bill to pay long before they actually get the will through probate and have access to assets. It just seems morally wrong to me.
It is morally wrong, but since when did morals play any part in government policy?
You have, in fact, earned the income on which the payments on account are made. The first is due 31 Jan, 10 months after the earnings period commenced. Only half the tax is due at that point, even though you are much more than halfway through the year. The 2nd is due 31 July, which is 4 months after the end of the tax year. Compare this to someone earning under PAYE, for whom tax is deducted immediately, and it is clear that self employed people actually get a very good deal. It is also possible to ask to reduce the payments on account, if your income has been reduced and it is possible to prepare and submit your tax return prior to 31 July, so that the second estimated amount does not have to paid if it is found not to be due. What’s more, if your income is increased, the remaining tax is not payable until 10 months after the total income is earned.
The only way to become truly well off, in an occupation of your choice, is through self employment. However, this is of course quite risky – most people need an income for living expenses, and a self employed person can lose a big client, take ill, be sued, or otherwise lose their livelihood fairly easily.
In America, taxes largely follow the principle of constructive receipt. If you’ve received income, you owe taxes. Future earnings, potential appreciation, potential dividends, or anything else that isn’t accessible as cash isn’t, generally, taxed.
Many people wait on accounts receivable, year or month end payments, or settlements that may not yet be in the bank. Our IRS can sometimes be negotiated with, if you’re lucky enough to get someone on the phone, but they’re far from merciful.
A taxable event like a death, divorce, or business downturn won’t elicit much mercy – they’ve heard all of the stories one can imagine.
And want their cut of any proceeds.
But taxes should ONLY be for maintaining the infrastructure of our land. No other purpose. I include state pension in infrastructure. No tax money should go to foreign regimes.
Correct as regards the process and timings, but only true as regards amounts of tax due if income is fairly stable (regular property rents, fixed-rate interest or bonds, and similar). The problem here is the variability of arts derived income; made enormous by pandemic shutdowns.
As someone who’s never been in the position of completing their own tax return, but may well do so in future, thanks for that concise clarification.
Agree – like you say, self-employed are paying taxes well after it’s earnt. But that still doesn’t make it easy when they are having to pay 18 months of tax after one year of earning. Personally I’d prefer a more frequent and up-to-date payment system – I struggle to remember the details of my business when it comes time to finalise the tax return – and no, I never manage to be sufficiently well organised to submit early!
Many commentators kindly praise or not so kindly scold Darren for not understanding the mess he was in but dealing with it. But what sort of moronic government department wants minor earners to pay tax on future income they may never earn?
Gordon Brown strikes again, pulling in tax income which is not yet due…
It isnt future income.
Er, yes it is! Subject to earning it, not been dead, etc
…and it wasn’t Gordon Brown.
The government of France. A you tuber I follow had got his finances all straight for I think the first time ever,he had a car lined up to buy,it seemed his life was about to take off after a decade of struggle then out of the blue and for some reason even his accountant couldnt justify the French govt sent him a bill for £5K future tax,to be paid now. In euros of course.
It must have been heartbreaking,he may even have cried. No car. More slog. And he couldn’t object or it would have certainly ended his French citizenship quest.
Debt is always relative but the question of debt to govt speaks to another issue. We consider ourselves taxpayers, which is true, but we are also consumers of the govt services that our tax dollars fund. How many people believe they are getting an adequate return on what politicians love to call “investment”? I daresay the number of dissatisfied customers far outnumbers the happy ones.
Don’t you just love it when tax collectors refer to us as ‘customers’.
Customers have a choice..
I understand what McGarvey went through. I incurred a lot of debt many years ago, mainly because I just didn’t grasp compound interest [and still don’t to this day] – so I was paying off the minimum on my credit cards, bundled them into a consolidation loan, and still – stupidly – kept using the credit cards. I eventually sought help from a debt advice charity. It took me 6 long years to pay off the debt, during which time I was working for nothing other than to pay bills and make debt repayments. No money for any little luxuries such as a holiday or meals out. It was a miserable time, but it taught me a lesson and I’m now totally averse to debt. If I can’t afford it I don’t buy it. I keep one credit card in case of emergencies but have a nil balance on it. I don’t have an overdraft either. My fear of compound interest almost amounts to a phobia.
Rule on credit cards: don’t pay off the minimum; pay them off IN FULL (capitals copyright Martin Lewis).
Eleanor – if you pay off the minimum it is not the compound interest that gets you, it is that the percentage you have to pay as a minimum is deliberately set so low that you are paying off each month such a low proportion of your debt that the amount you pay will be virtually all interest – each month!
At one point, and on some cards (it might still be the case – I don’t have the stomach to check) it could take you 25 years to pay off a single debt. The minimum payment is a seductive con and that is where compound interest ties you in to multiple years of providing very profitable earnings for the card company.
Yes, the debt advisers tried to explain it to me but it never really sank in. And I can’t for the life of me work out how much interest I would pay on a given amount. I have the same problems with Maths as dyslexics have with English, so that’s why I figured it would be best to stay well away from debt once I’d paid off all my debts and cleared the mortgage. The arrival of online banking has been of huge benefit to me in keeping track of day-to-day expenditure.
Self assessment (including the liability to make payments on account) was brought in by the previous conservative government and not Gordon Brown. It is a payment on account, based on the previous year’s tax. If the current year’s tax will be reduced for some reason (such as reduced earnings or higher deductions at source) the POA can also very easily be reduced. And, as it is a payment on account, the situation described, where a £15K tax bill becomes a £22.5K tax bill may well be a one off, because when the taxpayer gets to the following January with a £15K tax bill, it will already have been paid (although a further POA of £7.5K would probably be payable for the next year.)
It seems that the writer’s financial education is still incomplete!
Good on you, Darren (Loki). I know you a bit, but I am on the other side of the pond and am not a usual “consumer” of your ilk. But what I have seen of you and your story, I applaud! I am not unfamiliar with your experience. At three years of age, my father left my mother for a younger woman and started another family. I grew up the youngest of five in diminished and embarrassing circumstances. We were not dirt poor, but constantly constrained. Everything in that dynamic pushed me to find financial certainty and, eventually, I did. I learned a lot about debt and management and pitfalls. Our culture does not make financial numeracy plain. Obfuscation abounds.
But the real story here is the wonton, brutal approach taken by governments towards the self employed. This is the real story here. Gordon Brown came from a finance background and he, with many others, are complicit in setting up a regime that places unjustified burdens on self starting self employed. This is the real crime here. There is plenty to blame you for. It is good that you have the talents to act, jive, maraud, hustle. Good on you!
But there is a war on self employment and that is seen in spade in the treasury demanding you pay a liability way before you have earned what will create the liability. Quarterly payments in arrears would be a much more just way for the Exchequer to exact its toll on you.
The government wants to kill human resourcefulness. It wants us all to work for the man and have payments withheld each week or two. It makes no reasonable accommodation for the small entrepreneur. And that is the real shame!
I want to thank you for your very interesting article and say that I think you are being little harsh on yourself. It is perfectly reasonable that we should accept that you have faced a very difficult time; different problems to those struggling on low incomes but major problems non-the-less.
Well done, Darren. I admire your spirit.
You never had a tax guy? In the US, everybody who comes into sudden prosperity as you did immediately acquires a Tax Guy. He will have you do a number of things that at first appear crazy, like incorporating in the asteroid belt or selling your wife and leasing her back. But you take the steps indicated because you will save that way.
Unfortunately with mortgage rates much higher and real estate prices here in Canada at an all time high many people are going to find themselves in a similar situation when it comes time to renew. I suspect that is the case everywhere.
Paying money across to HMRC on 31st January and 31st July focuses my mind not only on funding the liability but also on how it is likely to be frittered by HMG. If more people paid taxes in this way rather than through PAYE (where payment is passive) I’m convinced you’d have more questioning of public expenditure. It’s the PAYE system that I consider the more sinister of the two.
The truth is at school we get taught f**k all about how to manage money and build wealth. But they sure do sow the seeds of getting into debt (the entire system is built on it…).
A few years back after being in tens of thousands of debt (business loans, car loans, credit cards, overdrafts etc.) I came across Dave Ramsey’s approach to paying off debts and building wealth.
By using his debt snowball approach we cleared our debts (except the mortgage) a whole 4 years earlier than accepted this past year. We then set about building a 6-month-old emergency fund and now our focus is on investing what we use to throw at debt each month along with paying down the mortgage twice as fast.
It sure is liberating and empowering taking back control and building financial security…
I know exactly what it feels like to wake up in the night with that wave of fear that washes over you… Well, it won’t be money that causes that anymore.
This is incredibly and overwhelmingly inspiring,in fact I’ve ordered this guys book on,not the big A. Education in financial management is not taught us,unless you are lucky enough to have canny parents,because our economy is based on Growth so we need Fools to buy Objects of Desire.
I am impressed by your approach to hardship. You accepted it, took full responsibility for your situation, and then went to work on doing what you could to change your circumstances. No blame, just change.
I enjoyed (if that’s the right word) Poverty Safari and your performance at the Glasgow Sleep Out. This is a good article, and it’s good to hear from someone who has been through it – everything you say is right, particularly: it’s your problem and you’re the only one who can fix it. There should be much more help though, and the tax system really doesn’t help – along with everything else, it’s stacked against you every step of the way. When I started working free-lance many years ago, I made a habit of putting 30% of everything I earned on one side – I knew it should be more than I would need for tax etc., but wanted to be certain. I’ve kept that up. Also – you don’t need to pay an accountant – if you understand basic maths, can organise your household bills and are able to learn stuff by reading online guidance, then you can do your own tax submission and accounts, so save the money. But make sure you keep all your records, and take two days a year to create spreadsheets and files to back up your submission.
A good tale thank you! And not uncommon – many a better educated person has fallen into the same trap of unforseen taxes, including many musicians/artists who end up back on the road past their prme to pay the bills.
I can’t remember the name now but I think I read in an Alan Bennett story of a writer who came into prize money or royalties, generously gifted it to many people only to realise he still had to pay the tax himself later – aaagh…
When you are a poverty-stricken socialist you can fulminate about how the rich are not paying their fair share. Once you actually start getting a decent income you soon learn how the tax system is both over-complicated and stacked against the taxpayer.
Any error on your part and you start incurring penalties whereas when HMRC make errors no penalty applies to them, and as the author discovered to his cost HMRC likes to collect forward on the basis that what you earned last year you will earn this year. Even as a pensioner if you have a SIPP and draw down a large sum early in the year it will be assumed this monthly sum will be repeated throughout the year so you will be taxed at a ludicrously high rate and you will have to claim overpayments back. I normally receive a return of overpaid tax every year despite insulating myself from having to deal with HMRC by using an accountant.
A decent accountant would surely have ensured that if he was earning less the following year he could claim overpaid tax back. Working furiously to catch up on taxes wasn’t really necessary. Of course he may have overspent during his bumper year and forgotten the tax man would take his “fair” cut.
Gordon Brown.
A malevolent and bitter man, glowering at success and prosperity.