Ask a Yank (non political questions) thread.

[Buzz Rules]

Thank you that's really interesting!

Most Americans don't do their own taxes. I use H and R Block every year.

https://www.hrblock.com/

 

[Becx N Gav]

Most Americans don't do their own taxes. I use H and R Block every year.

https://www.hrblock.com/

In the UK people who work for a company (i.e. not self employed with their own business) have PAYE (pay as you earn) where the tax is taken weekly/monthly based on what they think you will earn that year. Then if it's over or under there might be a refund or request to pay more at the end of the tax year.

 

[lanejudy]

In the UK people who work for a company (i.e. not self employed with their own business) have PAYE (pay as you earn) where the tax is taken weekly/monthly based on what they think you will earn that year. Then if it's over or under there might be a refund or request to pay more at the end of the tax year.

Similar in the US; employers withhold tax from paychecks and pay it directly to the government. Likewise self-employed can make estimated payments throughout the year. @Buzz Rules was referring to the annual tax return that reconciles what you paid vs what is owed — which may result in either a refund or additional payment. Probably about half the US uses a tax preparer. Many do their own using specific software either purchased or free through the government. I’d venture to guess that it’s very very few who do it pen & paper now.

 

[steve_rob]

But that's the big difference over here, the vast majority of people don't even need to use tax preparers as there is nothing to file at all. I certainly have never done what we in the UK call "self-assessment" in my 30 years of paying taxes and I know of only one person in my circle of friends and family who has ever done so (and they don't currently need to).

Basically if you have a regular job (e.g. not self-employed), aren't making money from any other source such as renting out property or an eBay side-hustle (and even then, there's a significant threshold to reach before any tax is owed), then in the UK your employer will be doing this all for you behind the scenes without you even knowing about it.

 

[lanejudy]

But that's the big difference over here, the vast majority of people don't even need to use tax preparers as there is nothing to file at all. I certainly have never done what we in the UK call "self-assessment" in my 30 years of paying taxes and I know of only one person in my circle of friends and family who has ever done so (and they don't currently need to).

Basically if you have a regular job (e.g. not self-employed), aren't making money from any other source such as renting out property or an eBay side-hustle (and even then, there's a significant threshold to reach before any tax is owed), then in the UK your employer will be doing this all for you behind the scenes without you even knowing about it.

Ah, I see. Our "income tax" is not only based on earned income but also unearned income -- such as investments (interest, dividends, capital gains, etc.), some retirement payments (pensions, Social Security, etc.), and royalties plus less common things like inheritance, gambling/lottery winnings. Plus the things you mention like rentals and eBay. Then there are deductions which reduce your tax burden -- healthcare expenses, childcare, mortgage interest, local and/or state taxes paid, charitable donations, certain retirement contributions, student loan interest, among many others. Taxes paid to one state vs income taxed in another state. That all gets reconciled. Our tax rate is not a flat percentage of earned income; it depends on variables such as single/married, number of dependents, etc.

Then there are state income taxes and in some places a local income tax. Property taxes are separate or in some places personal property taxes. That all varies by state and municipality.

 

[VandVsmama]

Why does your bacon explode on contact with a fork ?

Because you're not supposed to eat American bacon with a fork.

 

[VandVsmama]

This I can't eat bacon in the States for this reason. Intrigued to know how Americans feel about the bacon we have and how you think it compares?

UK bacon is just...bleh. No thanks. About as pleasant to eat as Canadian bacon. Yuck. Give me a crispy piece of American bacon instead any day!

 

[Buzz Rules]

British Disboarders, are there any tv shows we get here first that you wish you didn't have to wait for in the UK?

 

[steve_rob]

British Disboarders, are there any tv shows we get here first that you wish you didn't have to wait for in the UK?

Can't speak for others, but for myself the answer is "not any more".

Go back 15-20 years and we would have to wait 3-6 months for new series of things like Friends, ER, etc. to come over to the UK and that was frustrating. But slowly over time those gaps started to get reduced down to weeks and then since the advent of streaming, we now normally get the big shows pretty much at the same time or at worst days later.

Some smaller, more niche shows might still be subject to delay, but that's more because there might be some doubts by higher-ups at Netflix/Amazon/Disney/whoever as to whether there's a big enough audience over here for it and so they'll hang on for a while until they think the hype has built up enough to justify its release.

 

[clappyclaps]

Can't speak for others, but for myself the answer is "not any more".

Go back 15-20 years and we would have to wait 3-6 months for new series of things like Friends, ER, etc. to come over to the UK and that was frustrating. But slowly over time those gaps started to get reduced down to weeks and then since the advent of streaming, we now normally get the big shows pretty much at the same time or at worst days later.

Some smaller, more niche shows might still be subject to delay, but that's more because there might be some doubts by higher-ups at Netflix/Amazon/Disney/whoever as to whether there's a big enough audience over here for it and so they'll hang on for a while until they think the hype has built up enough to justify its release.

Totally agree with this. The US getting tv shows and films months before the UK used to drive me crazy like a decade or so ago, but nowadays it's barely noticeable if there's any delay at all.

As Steve has said, the only delays I notice are on the smaller, indie type films or shows which are few and far between.

In the case of Marvel films, we often get them a day or two before the US which is unusual.

 

[Lumpy1106]

But that's the big difference over here, the vast majority of people don't even need to use tax preparers as there is nothing to file at all. I certainly have never done what we in the UK call "self-assessment" in my 30 years of paying taxes and I know of only one person in my circle of friends and family who has ever done so (and they don't currently need to).

Basically if you have a regular job (e.g. not self-employed), aren't making money from any other source such as renting out property or an eBay side-hustle (and even then, there's a significant threshold to reach before any tax is owed), then in the UK your employer will be doing this all for you behind the scenes without you even knowing about it.

Do you pay a flat rate? By that I mean, here in the US, the more you earn, the higher percentage you pay in taxes. And that's by household - if DW makes a lot more than I do (and she does), the rate we pay on my salary also goes up. What about gains on investments? We pay foreign tax on investments in our mutual funds - so how do you pay that tax? Do you get a tax break on home mortgage interest or charitable contributions? There's really no way to account for that if your employer is doing it.

All this time we've just filed taxes in the US like it was such a normal thing no matter how convoluted . You'll love this; There were big fires in Altadena and Pallisades, both in LA County. Both of those areas are at least an hour's drive from us - we didn't even get smoke. We did get an extension on our tax returns though - because of the impact of the fires. We aren't filing until October instead of a month ago like everyone else.

 

[steve_rob]

Do you pay a flat rate? By that I mean, here in the US, the more you earn, the higher percentage you pay in taxes. And that's by household - if DW makes a lot more than I do (and she does), the rate we pay on my salary also goes up. What about gains on investments? We pay foreign tax on investments in our mutual funds - so how do you pay that tax? Do you get a tax break on home mortgage interest or charitable contributions? There's really no way to account for that if your employer is doing it.

All this time we've just filed taxes in the US like it was such a normal thing no matter how convoluted . You'll love this; There were big fires in Altadena and Pallisades, both in LA County. Both of those areas are at least an hour's drive from us - we didn't even get smoke. We did get an extension on our tax returns though - because of the impact of the fires. We aren't filing until October instead of a month ago like everyone else.

There are only three bands of income tax in the UK (well four if you include the 0% rate that you get on the first £12K of income) and the higher bands really only kick in at significant incomes - the vast majority of people only pay the basic rate which is 20%. Tax is also, barring a couple of very specific exceptions, done on an individual basis and not by household.

There are also not very many deductions available on our taxes. For example, mortgage interest relief was scrapped in the 1980's here. Instead of getting tax back on charitable donations, here instead the charity claims it - so if I give £20 to Cancer Research, at the end of the tax year (as long as I've filled out the Gift Aid form correctly when donating) they'll get an extra £4 as I'm a basic rate payer (they'd get more if I was in a higher band) but I don't see that or have to do anything to make it happen.

However there are some small deductions you can get. Personally I've benefited in the past from one where you got a (very small) allowance if you had to wear a uniform to work but only if you have to launder it yourself. In that case, you applied for the deduction on the HMRC website (equivalent to IRS) and if they agreed you were eligible, they would send you a new tax code. This has to be sent to your employer who will then apply it to your next payslip and you'll get the correct amount of relief. There was also one during Covid lockdowns where if you were mandated to work from home full-time you could claim an amount (once again very small) of your electricity costs back.

Other interesting things - we don't get taxed on lottery wins, gambling profits (for both, the government receives tax revenue straight from the operator) and game show prizes. I found out the last one when discussing Who Wants To Be A Millionaire with an American - their winners only see about $600K of their million or something like that, whereas ours gets the full £1m, which is about $1.3m US, therefore over double the amount!

 

[Lumpy1106]

There are only three bands of income tax in the UK (well four if you include the 0% rate that you get on the first £12K of income) and the higher bands really only kick in at significant incomes - the vast majority of people only pay the basic rate which is 20%. Tax is also, barring a couple of very specific exceptions, done on an individual basis and not by household.

There are also not very many deductions available on our taxes. For example, mortgage interest relief was scrapped in the 1980's here. Instead of getting tax back on charitable donations, here instead the charity claims it - so if I give £20 to Cancer Research, at the end of the tax year (as long as I've filled out the Gift Aid form correctly when donating) they'll get an extra £4 as I'm a basic rate payer (they'd get more if I was in a higher band) but I don't see that or have to do anything to make it happen.

However there are some small deductions you can get. Personally I've benefited in the past from one where you got a (very small) allowance if you had to wear a uniform to work but only if you have to launder it yourself. In that case, you applied for the deduction on the HMRC website (equivalent to IRS) and if they agreed you were eligible, they would send you a new tax code. This has to be sent to your employer who will then apply it to your next payslip and you'll get the correct amount of relief. There was also one during Covid lockdowns where if you were mandated to work from home full-time you could claim an amount (once again very small) of your electricity costs back.

Other interesting things - we don't get taxed on lottery wins, gambling profits (for both, the government receives tax revenue straight from the operator) and game show prizes. I found out the last one when discussing Who Wants To Be A Millionaire with an American - their winners only see about $600K of their million or something like that, whereas ours gets the full £1m, which is about $1.3m US, therefore over double the amount!

For comparison, we are usually a tick over 33% of our gross income AFTER deductions.
And to think we tossed tea off a boat because the Brits were taxing it.
Wait...
Did you know that?
https://en.wikipedia.org/wiki/Boston_Tea_Party

 

[steve_rob]

Yeah, but we also do have a secondary tax called National Insurance (supposedly to pay for state pensions but it all goes into the same government pot) that adds on another 8% or so (with different bands and allowances), plus our sales tax equivalent (VAT) is a LOT higher than yours, so I think overall the tax take for both countries works out fairly similar in the end - it’s just how you get there that differs.

 

[SnowBeast]

The US also has the insane tipping culture (I won’t start ranting again about it), which must add thousands of dollars onto an average US family’s yearly budget..we don’t have that to factor in to our budget over here.

 

[clappyclaps]

There are only three bands of income tax in the UK (well four if you include the 0% rate that you get on the first £12K of income) and the higher bands really only kick in at significant incomes - the vast majority of people only pay the basic rate which is 20%. Tax is also, barring a couple of very specific exceptions, done on an individual basis and not by household.

There are also not very many deductions available on our taxes. For example, mortgage interest relief was scrapped in the 1980's here. Instead of getting tax back on charitable donations, here instead the charity claims it - so if I give £20 to Cancer Research, at the end of the tax year (as long as I've filled out the Gift Aid form correctly when donating) they'll get an extra £4 as I'm a basic rate payer (they'd get more if I was in a higher band) but I don't see that or have to do anything to make it happen.

However there are some small deductions you can get. Personally I've benefited in the past from one where you got a (very small) allowance if you had to wear a uniform to work but only if you have to launder it yourself. In that case, you applied for the deduction on the HMRC website (equivalent to IRS) and if they agreed you were eligible, they would send you a new tax code. This has to be sent to your employer who will then apply it to your next payslip and you'll get the correct amount of relief. There was also one during Covid lockdowns where if you were mandated to work from home full-time you could claim an amount (once again very small) of your electricity costs back.

Our tax brackets are made even more complicated by the fact that when you get into the higher brackets, you don't pay the higher rate on all of your earnings, just some of it. My tax accountant friend has had to explain this one to me!

For reference for our US friends, the UK income tax brackets are currently:

Up to £12,570 = 0%
£12,571 to £50,270 = 20%
£50,271 to £125,140 = 40%
Over £125,140 = 45%

If you're in the higher 40% tax bracket, you dont pay 40% on all your wages - its the excess over the £50,270 that you pay 40% on. So as an example if you were earning £55k you'd be taxed as follows:

£12,570 tax free
£37,700 at 20%
£4,730 at 40%

The only other things we have that may impact/reduce tax are salary sacrifice schemes i.e. for a new car, as these reduce your salary meaning you pay less tax and NI. Does however have an impact on your pension.

 

[SirDuff]

Our tax brackets are made even more complicated by the fact that when you get into the higher brackets, you don't pay the higher rate on all of your earnings, just some of it. My tax accountant friend has had to explain this one to me!

I don't know of any country where this isn't the case* - you pay the higher rate only on the earning in that rate bracket.

*Admittedly, I only know of tax schemes in about five countries (plus the UN), so my sample size is super small

 

[clappyclaps]

I don't know of any country where this isn't the case* - you pay the higher rate only on the earning in that rate bracket.

*Admittedly, I only know of tax schemes in about five countries (plus the UN), so my sample size is super small

Don't worry it's probably me and my whole ignorance and lack of knowledge on these sorts of things! All I really know about is the ridiculous amount of tax I seem to pay every month

 

[SirDuff]

Don't worry it's probably me and my whole ignorance and lack of knowledge on these sorts of things! All I really know about is the ridiculous amount of tax I seem to pay every month

Honestly, it is surprising how many people don't realise this. The number of times I've heard/read people say that they won't take a raise/higher paying job becuase it puts them into the next tax bracket and, therefore, they'll actually take home less money than they do now. No, the tax rate that they pay on the money up to their current salary (and probably beyond unless they are exactly on the edge), does not change.

Note - there are some cases where there are "cliff edge" benefits (I think the child benefit in the England (possibly UK, not sure) is one of them) where, yes, a small increase in salary could mean that you lose the benefit and that benefit might be more than your salary increase. So, the increase is actually a negative in how much money you get in total. But this is not the same as saying that you pay more tax.