The whole Adele thing

Adele kicked up a bit of a fuss about having to pay 50% tax, as reported (and denigrated) by the Guardian, here: http://www.guardian.co.uk/music/musicblog/2011/may/25/adele-tax-grievances

As Tim Worstall points out, the article is not entirely accurate, but leaving that aside, I'd be very surprised if Adele did have to pay 50% tax.

The agreement that she has with the record company will say that she gets x% of the sales of her album. I've no idea what x is, but bear in mind that all CD sales are subject to VAT.  This is at 20% currently, added on to the pre-VAT price, so effectively removing 16.67% of the money long before Adele sees it.  For a given amount of sales, where Adele would have earned £100, she's now down to £83.33.

Then there's income tax and NI.  Adele mentions paying £4m in tax.  I'm not entirely sure whether she's treated as self employed or as an employee of the music company, but I'd assume the former, meaning NI is 2% and income tax is 50% on the vast majority of the income.

(Of course it'd be better if she was set up as a small company and paid herself dividends, in which case the income tax is 42.5% and I don't think there's any NI - I could be wrong though.  It's worse if she's a normal employee, because then there's Employer's NI, Employee's NI and income tax to worry about.)

This means that of the £83.33 that she would theoretically get, she'll only actually receive £40.00.  This, the actual tax rate that she's paying is more like 60%. 

The money that she will still have to spend VAT on anything she spends on "non-essentials" (and I never really understood how clothing is non essential, but books are essential?), making the effective rate for the money spent thusly 66.67%.  If she spends any money on things like cigarettes or alcohol it's considerably worse.

So there you have it - Adele's tax rate is really more like 60%

The Evils of Taxation

 I believe that a lot of what the government does, they shouldn't.  They provide services that could be obtained for less in the public sector, purely because the people in charge think that they know better how to spend our money than we do.  Everyone these days seems to be looking at the way the government spends our money, but before they can spend it, they have to take it from us.  As most people are unaware of just how much of our money is taken, I thought it worth taking the time to quickly explain just how much of our money the government gets it's grubby mits on.  In particular, I'm interested in the marginal rate that you pay.