David Harding\’s tax bill

Not entirely convinced by this reporting you know.

David Harding earned an income of £87m last year from Winton Capital Management, the investment firm he founded in 1997, and paid an annual tax bill of £34m – enough to fund the salaries of 1,500 newly-qualified teachers.

But the 51-year-old admitted that he was not \”whiter than white\” and had paid an overall rate of just 39pc in the last financial year, as he makes the majority of his money from dividends rather than salary, which are taxed at a lower rate. Mr Harding currently owns 56pc of Winton Capital Management.

Over the year he took a £16.1m salary, paying £8m in income tax, and made National Insurance contributions of £325,000. He also earned £71.3m in dividends and paid 40pc tax on that.

Because this:

Last year the business enjoyed turnover of £350m and made operating profits of £233m, paying £62m in corporation tax.

I know certain readers have a better grasp of this than I do. But there\’s something hinky about that calculation. For some part of that corporation tax bill is imputed to be the tax on his dividends. Dividends are paid net of basic rate tax as corporation tax has already been paid upon them. What the individual then pays in tax is only enough to take them up to the higher rate.

Plus, look at that NI charge. Given that he owns 54% of the company the distinction between employees\’ and employers\’ contributions is particularly problematic for him. There\’s another £800k or so of employers\’ contributions to NI that could be partially or wholly ascribed to him based upon that salary.

If anyone would like to work out his true tax rate?

7 thoughts on “David Harding\’s tax bill”

  1. Dividends are deemed to have been paid net of 10% tax. So for each pound of dividend paid the notional dividend is 1/0.9

    The top tax rate for dividends is 42.5% on the notional dividend paid.

    So for each pound of dividend paid, the actual top tax rate is (42.5% – 10%)/0.9 = 36.11%

    Harding’s dividend income will come out of profits net of corporation tax, which was 26% in 2011-12. So his marginal tax rate for this income will have been (1 – (1-26%)(1-36.11%)) = 52.72%

    It’s not entirely a coincidence that this is close to the 52% marginal tax plus employee’s national insurance rate for earned income. (Taking income in this way is attractive because employer’s national insurance is avoided.)

    The 39% overall tax rate he mentions seems to include earned income tax, employee’s national insurance, and dividend income tax, but to ignore employer’s national insurance and corporation tax.

  2. But David Harding hasn’t paid all the tax he should. He’s given some of money away to charities and universities. That money should have been fully taxed so that the government can decide where such money should go as it is better than a single person to fully understand the whole complex situation. /sarc

  3. His total income tax bill is £22.8M which is 39% of his salary plus dividends of £87.4M.

    His employees NI is £325k and the employers NI is £2.2M (It’s currently 13.8% on all earnings over 7.5K).

    Since he owns 54% of the company, you might argue that he has borne 54% of £2.2M which is £1.2M.

    Using the same basis of earnings for the “39%” calculation, that would give you a rate of just over 40%.

    But it’s more complicated than that because of the interaction between NI and CT .

    For comparison, if he took all his earnings as salary, he’d be at 50% (and 52% inc NI), but all the salary and Er’s NI would reduce the CT bill.

  4. All I know is that he paid more tax in one one year than I would pay in 1000 years, and I’m probably in the top 5% income-wise. So if I was the Chancellor I’d be licking the soles of his boots to ensure he stayed in the country. Instead we have people like Nick Clegg doing their damnedest to make him leave. Stupid cunts.

  5. @SBML#4: “/sarc”

    I’ve been over at the Graun’s CiF for the last couple of hours, and I was just gearing up for a blistering response, when you saved me the trouble.

    Whew!

Leave a Reply

Your email address will not be published. Required fields are marked *