Charlotte Baroukh Explains the UK Tax Traps Quietly Costing You Money

This transcript is auto-generated and lightly edited for readability, it may contain errors.

[0:00] Sammie Ellard-King:

Welcome back to the Money Gains Podcast. Do you find tax a headache? And do you feel like you need an accountant to understand your taxes? Well, we’re going to put that to bed today. And we’re joined by Charlotte Baroukh from Pie. Charlotte, how are you?

[0:12] Charlotte Baroukh:

I’m good, thank you. How are you?

[0:14] Sammie Ellard-King:

I’m great. Yeah. It’s Friday. The sun is shining in London. Like, what more could you want?

[0:19] Charlotte Baroukh:

I know. Makes all the difference.

[0:20] Sammie Ellard-King:

It probably won’t be by the time this episode comes out. Like raining.

[0:23] Charlotte Baroukh:

I feel like it might be one day and then that’s it. Gone for the weekend.

[0:26] Sammie Ellard-King:

Literally. Literally. But I want to start with a big one today because, like, what you do is amazing with Pie, and I think it’s awesome. And we’re going to get on to that shortly because it’s going to help a load of people. But why is tax in the UK so confusing?

[0:43] Charlotte Baroukh:

Okay, so tax, you’re right. Tax is so unbelievably confusing. And I think there’s a misconception about it because it’s actually not that confusing once you get your head around it. But the fact is, there are so many taxes in the UK. So people struggle to get their head around all of them. But once you kind of sit down, go through the basics, it’s really straightforward to do.

[1:05] Sammie Ellard-King:

Really?

[1:06] Charlotte Baroukh:

Yeah, it is. It is really straightforward. But there are just so many you have to think about for all different things. If you’re selling shares, if you’re buying a house, your income tax, your PAYE, like if you’re employed. So it is a minefield. It’s just, I think it’s just the sheer number of taxes that there are in the UK.

[1:21] Sammie Ellard-King:

When I do it, it’s weird because you find that like what you do one tax and you hit that threshold, but then it affects that one over there. And then it’s like, oh my God, am I being tax efficient? Yeah. You know, and I’ve been stung in the past as well. And it’s like, oh, I just wish someone had just sat down and told me that. And eventually you’re just like, right, I need an accountant.

[1:42] Charlotte Baroukh:

Yeah. I mean, listen, accountants, they they know all the reliefs that you can get, the deductions. But I think that the most important thing that people need to do and people don’t realise is as long as they like have all their receipts and expenses, they will then know what they’ll be able to deduct. And I feel like people just, you know, they just chuck things away and don’t think about it. And that means that they could be stung because they don’t know that they could be saving so much.

[2:06] Sammie Ellard-King:

Yeah. Yeah. And there’s that’s where it comes into play. It’s like the savings. But I also find that a lot with accountants that I’ve used in the past, like they’ll just sort of tick the boxes and they won’t like be find the real efficiencies in tax as well. And like that has been a game changer since I’ve found one that does. Because they’re like, don’t do this anymore, stop doing that, move this over here, do this.

[2:31] Charlotte Baroukh:

And also I feel like you definitely do this on your page. I do this on mine. But there are so many things that just anybody can do to be tax efficient with their savings. So I mean, I know you’ve spoken about ISAs loads. I bang on about ISAs, but it’s just a way that people can invest and grow their wealth and actually not have to pay any tax. It’s kind of not even reducing tax. Like in on that money, you will not be paying any tax. And there are so many things like that that are just so simple for people to know. And I feel like there’s like, I mean, you have such an amazing following and you’re reaching so many people. And I feel like that is you’re helping so many people save on tax. And that’s it’s not necessarily accountants, it’s people just like passing on knowledge. And that is so important. Just like, you know, help your friend tell them the kind of things that they can do.

[3:17] Sammie Ellard-King:

Yeah. What I came across recently was like the rent a room scheme. And I was like, what an amazing thing for people to do. And it’s like seven and a half thousand pounds. I know. It’s like renting out a room to a lodger uh in your house or an annex, and you can still like get that money coming in, and then that’s extra tax income as well.

[3:34] Charlotte Baroukh:

Absolutely.

[3:35] Sammie Ellard-King:

Especially in this economy, right? As well.

[3:36] Charlotte Baroukh:

I mean, every little helps. Yeah. I mean, that is another reason why people are turning to side hustles and you know, side side income is such a thing. Cost of living crisis, people need to make as much as they can. And that’s actually one of the questions that I’m asked the most about how do I kind of do tax, um, how do I sort out my tax for my side hustle because I’m employed, but I earn a bit on the side. So, like, what do I have to do? And actually, the rules have changed on this recently, which could be saving like I think it’s 300,000 people. They won’t have to do tax returns anymore if they were gonna have to, because they’ve slightly changed their thresholds from £1,000 to £3,000.

[4:15] Sammie Ellard-King:

It’s gone up.

[4:15] Charlotte Baroukh:

It’s gone up. You still have to pay tax between £1,000 and £3,000. Right. But you you just kind of you you declare it on like an online system. This this is for a few years’ time, by the way. It’s not immediately. Okay. And you just quickly fill out some form online as opposed to having to do a whole self-assessment that otherwise you never would have had to have done. So HMRC aren’t always against you. They’re trying to make your life supposedly a bit simpler. But yeah. So, but side hassles are a major thing at the moment.

[4:45] Sammie Ellard-King:

Every time I see that reel with the guy that’s like, who am I doing this for? And then he looks at his face. HMRC absolutely cracks me up.

[4:52] Charlotte Baroukh:

Yeah, I know.

[4:52] Sammie Ellard-King:

It’s so it’s true, though. It’s true. It is true. Unfortunately, we have to pay tax in this country. But I want to ask you what’s something you feel like you would wish everyone knew about their own income tax.

[5:07] Charlotte Baroukh:

I okay, there’s another misconception that I hear a lot, and people panic because they think they hear about these um thresholds, you know, 20% of your basic rate, 40% or 45%. And I genuinely get so many questions saying, I don’t want to earn over 50,000 pounds because if I do, I’m gonna have to pay 40% tax. And it’s like, no, we have a progressive tax system, which means that over the 50,270 pounds, you’ll pay 40%. Under that, it’s still 20%. So you should still be striving to, you know, increase your income. It is progressive, but there are so many people that just, they just don’t have the financial knowledge. And it’s not their fault. It’s the fact that it’s nothing’s discussed in schools. And I think that this is, I think that’s, you know, it’s really, really bad. I feel like people are, you know, thrown into the working world after university or if they don’t go to university straight from school and they have no idea what to do. They’ve never been told what to do. I mean, that also extends to like mortgages and all these sorts of things. But I just feel like there should be an emphasis on financial education in schools. And I I don’t understand why there isn’t.

[6:16] Sammie Ellard-King:

Yeah, you make such a good point. Like I I saw um Claire Barrett do like a video about this recently. Um we’re actually gonna remake it because it it it clearly hasn’t, you know, one video doesn’t reach everybody, right? So it’s just like, how do we repeat this drum? Because I get this question too. It’s like I don’t want to go over the 50k. I’m like, oh, what are you on about? Yeah. Like, you know, is if you’re 51,000, you’re only gonna get taxed on that, you know, 800 odd quid at that 40% rate. Um and it’s just it’s like filling up the cup.

[6:44] Charlotte Baroukh:

Yeah.

[6:44] Sammie Ellard-King:

And once you hit the certain levels, you’re then with it, everything within those levels are then subject to that form of tax.

[6:50] Charlotte Baroukh:

Yeah.

[6:51] Sammie Ellard-King:

And so I think that’s like really important. But you’re totally right. Like that is that exercise, one video like that, and everyone would go, got it for life.

[7:00] Charlotte Baroukh:

Yeah.

[7:00] Sammie Ellard-King:

And it would just be a simple, you know, that you could do that in 60 seconds with people in school and it would change.

[7:06] Charlotte Baroukh:

Oh, 100%. But then on the back of that, I also, I’m sure you’ve heard about this 60% tax trap where essentially if you go over £100,000, your personal allowance, which is £12,570, gets reduced by one pound for every two pounds that you earn, if that makes sense. So when you get to one £125,000, your personal allowance is gone. Okay. Now there’s a lot of videos online, you know, kind of almost scaring people into saying, oh my gosh, if you earn over 100,000 pounds, you will fall into the 60% tax trap. And it’s like, actually, no, your personal allowance is decreasing, but you’re still only paying 40% of tax. So again, people need to know, I feel like it just needs to be like a formal education of exactly how everything works because otherwise, people hear things online all the time and they’re like, oh my gosh, actually, I don’t want to be paying 60% tax if no one else is paying 60% tax. So yeah, I I think that there are some amazing people who are really striving to get this into schools, which is amazing. And I just think that’s so much more important than like Pythagoras’s theorem. And I loved math at school, but I just feel like there’s, you know, you you we need to like equip our kids for life.

[8:20] Sammie Ellard-King:

Yeah, totally. Yeah. I’ve been like seeing a lot more people like move into like homeschooling as well.

[8:25] Charlotte Baroukh:

Yeah.

[8:26] Sammie Ellard-King:

Just simply because they’re just like, they’re not getting anything out of this.

[8:29] Charlotte Baroukh:

100%. You know what?

[8:30] Sammie Ellard-King:

It really rammed it home for me. I watched Adolescence recently, I’m sure everybody’s seen it. Have you seen it?

[8:34] Charlotte Baroukh:

I watched part of it, but with young kids, I I found it a bit too nerve-wracking for the future.

[8:38] Sammie Ellard-King:

I totally understand. Yeah. Because it it really does ram it home. Like, um, you know, my partner, uh her sister has kids of that age, and you see exactly the same like way that they uh interact with the world like that, and those school systems, and it just it took me back, and I was like, yeah, it was actually just like an absolute like my school was just nuts, right? Like and we just walked out of there, and I’m actually to this day, there’s only a small part of that. I would say probably use about 10% of my education. Nuts. I know. How how can we turn that to 90%?

[9:11] Charlotte Baroukh:

I know.

[9:12] Sammie Ellard-King:

And financial education for me is like the largest part of that. And following up on from that, obviously income tax, which we just discussed, pay slips.

[9:22] Charlotte Baroukh:

Yeah.

[9:22] Sammie Ellard-King:

Big one. Because people get paid and they don’t understand.

[9:26] Charlotte Baroukh:

They don’t even look.

[9:28] Sammie Ellard-King:

They just look at the number at the bottom.

[9:30] Charlotte Baroukh:

Yeah, exactly. And actually, that’s one of the things they don’t understand because they’ll look at the number at the bottom. Let’s say they earn £24,000, let’s say, just to make the numbers easy, um, they’ll expect to get £2,000 a month. And uh they’re looking at their payslip because their bank account is not showing £2,000. And they’re like, why what is gross pay? What’s net pay? Why aren’t they the same? What’s been taken out? I don’t want to pay national insurance. Like, I’ve not signed up for this. You know, they don’t understand that this is what everyone has to pay. National insurance comes out of your gross pay tax, your pension contributions, like there are so many things that people don’t know about. And the tax code, which is normally at the bottom of your pay slip, you know, you need to be on top of that because HMRC, people always blame HMRC for getting these things wrong. But at the end of the day, if you have, let’s say you have a side side income and you only declare it kind of the following year after the tax year end, HMRC aren’t going to know that you’ve got this side income. So it your tax, your payslip will most likely be wrong because the HMRC don’t know that information yet. So it’s it’s up to you. And I think that if the burden is on the taxpayer, they need to be given the education to know what they’re looking for in the first place.

[10:41] Sammie Ellard-King:

Totally. And that tax code as well can be so many different like variations.

[10:45] Charlotte Baroukh:

Exactly.

[10:45] Sammie Ellard-King:

And just understanding what that is is really important. Like majority of people should be on the 1, 2, 5, 7, L tax code.

[10:52] Charlotte Baroukh:

Yeah.

[10:52] Sammie Ellard-King:

And if you’re not, that means your personal allowance is either increased or reduced. Normally reduced. Normally reduced.

[10:58] Sammie Ellard-King:

Yeah.

[10:58] Sammie Ellard-King:

Um, and then when you join a company, often you’re put on emergency tax because your tax code hasn’t been submitted yet. Yeah. And so you’re getting whack of tax, but then it will balance out over time. That’s what something’s crucial here. HMRC does do a good job of eventually pulling you back to sort of normal levels, right? Or what what normal is for you.

[11:16] Charlotte Baroukh:

Yes.

[11:17] Sammie Ellard-King:

Is there anything else that uh they should be aware of on their pay slip, like to look out for and it and question as well if there’s like something on there?

[11:24] Charlotte Baroukh:

So another thing that is on the pay, which is on most people’s pay slips, are pension contributions. And it’s really important to know how these can actually really benefit you and reduce your tax. Because if you pay into a pension, you have a £60,000 allowance every year, and that can reduce your tax because the money that’s put into your pension is essentially taken out of your income and you won’t pay tax on that. You will have to pay the tax when you eventually draw down on your pension. But if you’re tax efficient, you can you can minimize that. I mean, I’m not gonna go into all the figures, but you can minimize that. But the fact is, you can reduce your income now. And that’s a really good tax um efficient way of saving money and also preparing for the future because a lot of people don’t know, you know, not don’t know, just don’t realise and aren’t thinking about the future. And you need to, because you don’t want to be stuck. You don’t want to be stuck in a, you know, you should be enjoying your retirement and not panicking about not having any money.

[12:19] Sammie Ellard-King:

It’s so tough to make people like do that because they’re like, oh, I want to live for the now and I’d like more money now. Yeah. XYZ, but it you you make a great point because it’s it’s on your gross pay and you’re getting the tax relief on that money as well. Yeah. So it’s like it’s becomes a no-brainer. And it’s also interesting when people like say it get £105,000 salary, they’ll bring that down to keep their personal by using what’s called a salary sacrifice.

[12:45] Sammie Ellard-King:

Yeah.

[12:46] Sammie Ellard-King:

Is that something you have seen quite a bit a lot of people do? So salary sacrifice into their pension?

[12:52] Charlotte Baroukh:

Oh, absolutely. And it’s it’s not just that, it’s also to if people are trying to bring their um their income down into the basic rate.

[12:58] Sammie Ellard-King:

Oh, interesting.

[12:59] Charlotte Baroukh:

Oh, yeah, absolutely. I I feel like you’ve there are so many ways to be tax efficient and it’s really not complicated. That’s the main part. It’s really, really not complicated. And there’s so much information online. Um, and it is, yeah, it’s just it’s just really important to just stay informed and yeah, try and work it out for yourself as well. Try and think about things that you need in life. So, for example, even like cars, and think about how you can work that into reducing your income or you know, doing salary sacrifice schemes for a car or something like that. There are so many different things that you can do.

[13:31] Sammie Ellard-King:

Yes. So um there’s like um, you know, the the ride to work scheme as well, you get your the tax back on your bike.

[13:39] Sammie Ellard-King:

Yeah.

[13:39] Sammie Ellard-King:

And my other half got uh something sent around, I think it was like octopus energy or something like that, where you can get the electric car um for cheaper, it comes out of your pay, you don’t pay the tax on it.

[13:51] Sammie Ellard-King:

Yeah.

[13:51] Sammie Ellard-King:

So it’s like really great way of like being tax efficient with purchases as well through your work scheme, which is really and another thing to keep note of is also working from home.

[14:02] Charlotte Baroukh:

So many people are working from home nowadays, and you can claim that back. Uh well, I say claim it back, you can claim it as an allowable expense, which therefore is slightly in a different way, but it’ll be reducing your income, your taxable income. And it’s it’s yeah, it’s really good.

[14:16] Sammie Ellard-King:

That’s such a good chart, actually. Yeah. I remember doing that as well because it like in COVID, they were like, Well, yeah, how often we work at home. Yeah. It’s like a reduction of your household bills, isn’t it? Yeah. Because you’re paying that because you’re it’s a proportion.

[14:26] Charlotte Baroukh:

Either either you can do it’s a six pound like flat fee, flat rate per week, if you don’t want to kind of calculate it. If you want to calculate it, you can you can deduct part of your utilities, your internet, your Wi-Fi, like the proportion of your um home that is used for work. So if you have a, I don’t know, a study or an office and it takes up 10% of your house, you can then um you can then claim back 10% of your utilities. I mean, it could be so efficient.

[14:53] Sammie Ellard-King:

That’s you know, even on the six pounds, it’s a couple hundred quid. Yeah. But it’s worth it.

[14:57] Charlotte Baroukh:

Oh, absolutely.

[14:58] Sammie Ellard-King:

Flights to Barcelona sort of. Do you know what I mean? Completely. Yeah, however, you want to reuse that money. I I got a tax rebate through this morning. I was like, Amazing.

[15:06] Charlotte Baroukh:

Yeah.

[15:07] Sammie Ellard-King:

You know, and I always do the same thing. Like then I get this tax rebate, 33% goes to investments, 33% savings, and I spend 33%. Yeah. I do the same every time I get any sort of windful of money. And it’s just a nice way of like, you know, future me, you know, short-term me, and I’d like some new trainers, please. Yeah.

[15:24] Charlotte Baroukh:

Oh, you have to enjoy, you have to enjoy your money now as well. Yeah.

[15:28] Sammie Ellard-King:

Yeah, it’s so, so important. Now, the personal allowances we’ve spoken about a little bit here as well. And the thresholds, they haven’t really changed much in recent years. And that’s something called fiscal drag. Yes. Which you might see in the news, and you might be like, that’s one of those personal finance terminologies which sounds really bloody complicated. How on earth do I work that out? But what does it actually mean?

[15:48] Charlotte Baroukh:

So, in basic terms, it is essentially your pay, so your salary is increasing in line with inflation, but your but the tax thresholds are not moving. So, therefore, even though your salary is increasing, you are being taxed more and more. More of your money is falling into that tax bracket. And so you’re not necessarily better off. And it’s a real shame. I really thought that in the October budget, maybe wishful thinking, but I really thought they were going to make some kind of increase. And there has actually been um some petitions going around to try and increase this. And there’s talks it might be increased 20%. Sorry, not 20%, 20,000 pounds. The personal allowance. The personal allowance. Very interesting. Yeah. I saw one petition going around trying to get it to 45,000. Now there’s talks about it potentially going to 20,000. But it could, I just think people need to be helped.

[16:36] Sammie Ellard-King:

They do. They do. And it’s a really fast way of helping people, isn’t it? That’s like immediately can be done. Obviously, you know, it impacts the income that HMRC receive, and of course, then government spending, etc. But we’re not going to get into that today because it’s another conversation entirely. Um, but it would make such a big difference. Even the, you know, an extra seven and a half grand a year, yeah. It’s massive.

[16:59] Sammie Ellard-King:

Yeah.

[17:00] Sammie Ellard-King:

Um, you know, that’s food shops covered, so that’s energy rising costs, energy costs covered. I really do think that’s a quick win for a Labour government that’s potentially struggling a touch right now.

[17:11] Charlotte Baroukh:

Well, they’re saying that reform, that was the first thing reform were going to do. Um, which obviously would have got loads of people on board, but I don’t know, you they’ve got to make cuts somewhere. You know, everyone, everyone has their opinions on where the c the government should be spending their money. As you said, we’re not going to go into that today. But I get comments on it all the time.

[17:29] Sammie Ellard-King:

But you know, they raise taxes on business. Yeah. And so that’s like, and that that’s not hurt a lot of my friends who’ve got businesses, have had to cut workers or raise prices, which has been nuts. Yeah.

[17:42] Charlotte Baroukh:

Well, the main thing, the well, I say the main thing, one of the really big things, employer’s NI, um, is massive. So that’s they they’re increasing it from uh, well, they’ve just increased it from 13.8% to 15%. And they’ve turned around and said, you know, we’re we’re not hurting the worker, it’s for the employer. But it’s so short-sighted because in turn, the employer might not be able to pay the this increase NI. Also, along with the increased NI percentage, the threshold to pay it has decreased from 9,100 to 5,000 pounds. So so many people are now gonna fall into that. And people could be laid off because companies might not be able to pay them. So it’s just it’s a really sad time that we’re gonna be able to do it. Totally.

[18:23] Sammie Ellard-King:

Yeah, completely. Uh you know, Sainsbury’s alone is like £230 million a year increase in employee costs. Where’s that going? It’s going on the eggs, it’s going on the milk, and it’s going to yeah. There’s gonna be less workers in the shop, yeah. Essentially.

[18:39] Sammie Ellard-King:

Yeah.

[18:39] Sammie Ellard-King:

Um, so you know. Hey ho, Rachel Reeves, please, please raise our personal allowance. We’re gonna say it here today for twenty twenty thousand pounds, make some people happy off the back of it. But with that in mind, obviously, you know, rising costs, we all know cost of living is crisis. I’m not even gonna bother saying what it is, everybody knows it right now, you know, very buzzwordy, but it it’s happening, right?

[19:01] Sammie Ellard-King:

Yeah.

[19:01] Sammie Ellard-King:

And so people have turned to side hustles and side income to really kind of help them keep up pace with what’s going on around them. However, it is complicated. I know we’ve sort of touched on it briefly, but I’d love to sort of understand how it actually works. Because, you know, is my vintage t-shirt now taxable?

[19:21] Charlotte Baroukh:

Right. No. In a word, no. Your old t-shirt that’s gone on vintage is not taxable. The only ri the only way that anything sold on, you know, vintage or depop is taxable is if you are a reseller. So you are buying it to sell it at a at a profit. That is a business. If you’re just selling unwanted items, then no. But if you exceed £1,000 in sales, okay, but you you gotta sell a lot of stuff to get to get to a thousand pounds. Yeah, exactly. Um, the online platforms have to declare that to HMRC. So they will tell HMRC, but you will not have to pay tax on it. Yeah, because it’s not profit. Yeah. Exactly. Yeah. But you will have to pay tax if it’s if it’s an actual side business. So if you’re, I don’t know, making crafts and selling them uh for a profit or doing something like that, you have a £1,000 trading allowance every year. But above that, you will have to pay tax.

[20:15] Sammie Ellard-King:

And what is the tax, do you know, on that?

[20:17] Charlotte Baroukh:

It all depends on your tax bracket.

[20:19] Sammie Ellard-King:

Right.

[20:19] Charlotte Baroukh:

It’s uh it’s the same as income tax. So if you’re if it falls within basic rate, it’ll be 20%. Higher rate, 40%, an additional 45%. So it’s the same, it’s the same tax brackets.

[20:30] Sammie Ellard-King:

So if you’re a high like the higher rate taxpayer and you’ve got a little bit of side income, yeah, it makes to potentially look at, you know, locking that money up inside a limited company, essentially, or would you Yes.

[20:43] Charlotte Baroukh:

Okay, so that this is a question, again, I’m sure you’re asked a lot and I’m asked a lot. What sole trader or limited company, yeah, it all depends on your priorities. And it I I think the main main thing is the liability. So if you’re a sole trader, there is no distinction between yourself and your business. So if unfortunately, you know, you have debts and that need to be paid, your assets would have to cover them. Whereas if you have a limited company, there is limited liability. So the company is a separate legal entity to yourself. So if the company has debt, your personal assets are secured. Yeah. So that’s a big thing. And also the income taxes are different. So if you’re a sole trader and you’re doing side income as a sole trader, you pay income tax. If you’re doing it through a limited company, you pay corporation tax, which is 25% unless unless you fall within the marginal rate. But let’s say 25%. If you want to take that money out, you then have to take it’s dividend tax. Yeah. So it kind of swings around about. So it just depends, you know, what you’re looking for, what your priorities are.

[21:47] Sammie Ellard-King:

Yeah, I got it the other day. Quite a few people, interestingly, were like, what? So you just tax dodge then? And I was like, no, I’m just efficient. Yeah. Like, that’s that’s all it is. Because I take a director’s salary and I max max out my you know dividend delay. Allowance at the 8.75%. Yeah. And that just keeps me in those thresholds. And means I pay less tax. I don’t want to pay more tax.

[22:06] Charlotte Baroukh:

Yeah.

[22:07] Sammie Ellard-King:

So I think anyone that does want to pay more taxes clinically.

[22:11] Charlotte Baroukh:

Also, there are loopholes that HMRC no, sorry, maybe not loopholes. Well, I guess loopholes. There are reliefs and things that HMRC are giving you that you need to make use out of. You need to educate yourself and do it.

[22:24] Sammie Ellard-King:

Yeah. I read Taxtopia recently and this was like put it into my mind. It’s like they have written the playbook for you to pay less tax. Yeah. You just need to understand it.

[22:34] Charlotte Baroukh:

I mean, what you’ve just said about the dividend allowance and go, you know, maxing out to 8.75%. If more people knew about that, they they would do that. But I do feel like I’m seeing this a lot on social media and people literally writing down what they’re doing. And I think that is really helpful because people can relate to it. They’ll literally see the figures, compare it to their own figures, and hopefully incorporate the same sort of ideas into their into their salaries.

[22:58] Sammie Ellard-King:

Totally. It’s not all negative. Like the amount of people are like, oh, interesting. Like I’m gonna go in limited because that’s gonna save me so much money. And that’s the benefit. I think the the issue when you’re in limited is if you would then want to like take more, then suddenly you’ve got the factor in of the corporation tax and the higher rate dividend tax, and it doesn’t become as juicy. Yes. But you know, you can get a very good salary out of it and pay a lot less tax.

[23:22] Charlotte Baroukh:

So but also another thing about limited is there’s a lot more admin that comes with it.

[23:28] Sammie Ellard-King:

Totally.

[23:28] Charlotte Baroukh:

Yeah, as I’m sure you’re aware, there’s a lot more admin.

[23:31] Sammie Ellard-King:

Just done my years’ tax and it was a nightmare.

[23:34] Charlotte Baroukh:

But it is to do your years, your um annual accounts, your tax, and then if you take quarterly. Yeah, and then if you take the money out, so from your dividends, you have to do your own self-assessment as well.

[23:44] Sammie Ellard-King:

Yeah, just done that today.

[23:45] Charlotte Baroukh:

Yeah, so oh that’s good.

[23:47] Sammie Ellard-King:

Yeah, no, I have to because uh we’re applying for a mortgage. Uh and they’re like, we want to see two years. Yes, so great. So that’s another thing, you know. Being a business owner, it’s not easy to get a mortgage unless you’ve got two years of accounts in profit. Yes as well. I will say two years of account in loss, they ain’t giving you the mortgage.

[24:02] Sammie Ellard-King:

Yeah.

[24:03] Sammie Ellard-King:

So you’ve got to have that. Well, so you can get away. Some lenders will do it on one, but um the one with the you know, to get the better rates and the better options, the two years is important. Do you say do you see that quite a lot with the people that you work with in terms of business owners struggling to get mortgages?

[24:19] Charlotte Baroukh:

Uh no, I mean, I deal with a lot of uh sole traders. So not really. Most most people that I deal with actually are employed but have side income.

[24:29] Sammie Ellard-King:

Right.

[24:30] Charlotte Baroukh:

So that that’s the majority of the people that I deal with.

[25:18] Sammie Ellard-King:

It’s so interesting, isn’t it? Because like we have a lot of people that follow us in in our community as well, our soul traders, and they just play with this like, what should I be doing?

[25:28] Charlotte Baroukh:

Yeah.

[25:29] Sammie Ellard-King:

And where should I go? Do you have resources on Pie that helps them understand this?

[25:34] Charlotte Baroukh:

Oh my god, absolutely. Our our app is so straightforward for people to use. So it’s it’s for employee, um, employment income, self-employment income, rental income, dividend income. Honestly, there are so many different types of income uh streams on the app. It’s really straightforward to use. And the best part, well, I think the best part about it is it’s free. That’s definitely the best part about it. But what’s really good is that it has a bookkeeping function. So you could you input everything onto it, and then when the tax year end happens and you’ve got to do your self-assessment, it all feeds through. So then you can kind of see it, it it knows what your self-assessment should be, what your tax uh computation should be. And it just makes it so much more simple for you, especially if you have multiple income streams.

[26:19] Sammie Ellard-King:

I was having a little play this morning and I was like, this is where has this been?

[26:24] Charlotte Baroukh:

I know, I know.

[26:24] Sammie Ellard-King:

Um, because it just just like immediately people like seeing things visually with their money, right? And they just run in and say, Oh, okay, I need to put this aside for X, Y, and Z tax. I need to go this, this, oh, and if I do this, it’s gonna save me this.

[26:37] Charlotte Baroukh:

Yeah.

[26:37] Sammie Ellard-King:

I just thought it was a brilliant tool.

[26:39] Charlotte Baroukh:

Um But the reason why it’s come about is because of making tax digital. So, which is coming into play uh next April. I mean, it’s already started, obviously, with VAT, but for sole traders and landlords that earn over £50,000 from April 2026, you will not be able to use HMRC’s online platform anymore. You’ll have to use other tax softwares. Um, and that’s why Pie is amazing because it’s free to use. And um, but at the same time, if you want um someone to check it over for you, just to give you extra peace of mind, I think it’s like £50 or 60 pounds. You know, and it and it’s things like that are just good and easy to use. And yeah, and and it is easier actually than the HMRC uh current online portal because it’s so visual and because everything’s there and it all flows through. Yeah, it’s really good.

[27:30] Sammie Ellard-King:

It’s really well designed. And um, yeah, so hats off to you guys for that. Because I think it’s yeah, it’s a it’s a lovely bit of kit. But the what one of the things that I think is really important is that self-assessment because it is so clunky and when people do it themselves, you know, making a mistake on it is do you get fined or do you do you used to? Yeah.

[27:50] Charlotte Baroukh:

So the fines are more for late submissions and late payments. If you make a mistake um and you rectify it yourself, then obviously you’ll just pay the difference between uh what you have paid and what you need to pay. But HMRC don’t assume that you’ve done that innocently. They, you know, they’re so used to tax evaders that they’re yeah. Um, but going back to self-assessment being clunky, I feel like back in the day when people were having to do it by post and having to literally, you know, calculate their tax manually, like that was a really clunky process. I feel like there’s such a stigma about it. But now with these online platforms, it is really simple. As long as you are up to state with your documentation and you keep everything, it it really shouldn’t be stressful. And that is one of the things that um Tommy, the founder of Pie, really wanted to do. He wanted to take the stress away and the fear away from taxes. And there is such a fear when it comes to people are terrified of HMRC and terrified of making a mistake.

[28:45] Sammie Ellard-King:

Yeah, because you know, you don’t want to get it wrong, you don’t want to get fine, you don’t want to overpay.

[28:48] Charlotte Baroukh:

Yeah, yeah.

[28:49] Sammie Ellard-King:

Like so there’s so many things is like, and the more visual you can make it and the more easier and the more accessible. We’re in a digital age. Can I take pictures of my receipts and upload them? And can I, you know, can I easily track what I’m you know, bringing in money for the lady that does, you know, eyebrows and lashes or whatever that might all be. You know, she’s had three customers today. Can I input that? This is how much I’ve made. Yeah. Okay, great. I need to put this aside for tax. Like that should be so simple.

[29:15] Charlotte Baroukh:

Yeah.

[29:15] Sammie Ellard-King:

And it it and it hasn’t been until recently. Yeah. Um, but it is getting better, which is good to see. And tools like Pie is is a big one. Um, but you mentioned there about human hand holding as well. So it also offers that.

[29:32] Charlotte Baroukh:

Yes. So there are a few add-ons that you can do. So you can have um someone verify your tax return, so kind of do a check on it. You can also get um, I don’t want to say 24-7. I’m not sure it’s 24-7, but it’s it’s a year-round, yeah. What a sudden. Year-round tax support. That’s another option. And it’s much cheaper than your standard accountant. Yeah. Like me. Like it’s much cheaper than if I, you know, if I was doing someone’s accounts, it would be so much more expensive, you know, because you’ve got to get all the documentation and everything. Whereas this is all there. And if you’ve got any questions about the app, you just ping them a message. They’re so responsive. Um, it just makes it easier.

[30:08] Sammie Ellard-King:

I’m paying thousands in Vs to do my taxes. Yeah, like thousands. And even the self-assessment side of things was a few hundred quid. And it’s like, you know, so you’re saving money right there and then, um, which I loved. But one of the things we get asked about a lot is inheritance tax.

[30:25] Charlotte Baroukh:

Yeah.

[30:26] Sammie Ellard-King:

And it’s a big one. And there’s been, again, minefilled.

[30:29] Charlotte Baroukh:

Yes.

[30:29] Sammie Ellard-King:

And it’s been some changes recently.

[30:31] Charlotte Baroukh:

There have been changes recently. So they announced in the October budget. Well, one of the main things they announced was unfortunately for the farmers. So I’m sure you’re aware, you’ve seen all the protests, that um, they’ve always been exempt from paying inheritance tax. Um, and, you know, Jeremy Clarkson is one of the people that actually came out and said that he is putting his money into it, into farms, buying a farm, knowing that he that it will be exempt from inheritance tax. And I think the government have obviously cottoned onto this and they are trying to tax the wealthy people who are doing this. But the fact is, it’s mainly not wealthy people that are doing this. It’s families who have, you know, who’ve had farms in like for generations. It’s all they’ve kind of known. And it’s all they they they know that that’s what they’re they’re gonna go be going into. And it’s such a shame because they are so so how it works, how it will be working is that the first million pounds um of the farm is exempt. And then after that, they’ll be paying 50% of the inheritance tax. So essentially it’ll be taxed at 20% because inheritance tax is 40%. And um, it’s just such a shame because these families are gonna be whacked with such a high inheritance tax bill that they’re probably gonna have to sell part of the most of the equipment on the farm. Yeah. It’s just it’s horrendous. Yeah, the lads.

[31:50] Sammie Ellard-King:

Developers or whatever.

[31:51] Charlotte Baroukh:

Absolutely. And it’s just such a shame. And then on top of that, pensions, I think it’s from April 2027, are gonna be brought into the estate. Yes. So, you know, they’re it it was controversial. It was definitely that October statement uh budget was very controversial.

[33:14] Sammie Ellard-King:

Oh, completely. It was like they did it as like a PR win because they like lowered beer duty, they lowered like these like things everyone’s like, yay, but there was some sneaky ones that went into it.

[33:24] Charlotte Baroukh:

I mean, stamp duty was a whopper.

[33:26] Sammie Ellard-King:

Yeah, I’m stamp duty, I’m getting smashed from that now. Um, we tried to get everything rocking and rolling before then, but typically I had to wait for the self-assessment. And then it was like, okay, so it’s gone back up to normal levels, right? Is that right on stamp duty, what it was before?

[33:45] Charlotte Baroukh:

Yes. So they made, I can’t remember the exact numbers, but they’ve made um amendments a couple of years ago. But it is, I mean, stamp duty is one of the taxes, alongside inheritance tax, that people hate. They can’t get their heads around them. And it’s I’m just moving house. I know, I know. And you’ve already paid tax on the money that you are using to buy this house. I mean, yeah, stamp duty is is crazy. But it’s just so unfair for the first-time homeowners. Like the prices of property are rising so much, yet they’re um the thresholds has decreased to 300,000 pounds at the for not paying any stamp duty. Yeah. It’s just it’s it’s madness. It’s absolute madness.

[34:24] Sammie Ellard-King:

It really is. There is some like quick wins there, but I think they’re they’re struggling because they want to put spending up.

[34:31] Charlotte Baroukh:

Yeah.

[34:32] Sammie Ellard-King:

And they’re like, where are we gonna get the money from? Because, you know, we’ve got half of our millionaires, etc., leaving and all the tax burden that’s coming from that.

[34:40] Charlotte Baroukh:

So I actually read something, I don’t know how accurate the figures are, but 1% of people in the UK pay 30% of all tax.

[34:47] Sammie Ellard-King:

Yeah. And they’re 10% pay 62%.

[34:50] Charlotte Baroukh:

Yeah.

[34:51] Sammie Ellard-King:

It’s nuts.

[34:51] Charlotte Baroukh:

And it is nuts because they’re all gonna be fleeing the country and it’s only gonna bet it’s only gonna um be a detriment to everybody else.

[34:59] Sammie Ellard-King:

Yeah, absolutely. You you mentioned before about um making tax digital and HMRC, you know, going digital first. We’ve seen Rachel Reeves saying they’re plowing money into HMRC to essentially make that happen. You know, that I’m sure the tax dodgers out there are quaking in their boots, but what does that actually really mean?

[35:19] Charlotte Baroukh:

What making tax digital? Yeah. So essentially they’re trying to make the process simpler for everybody. They’re trying to reduce um errors uh by making everything um online. And I think they’re trying to catch people out. I mean, that’s the main thing, but it’s just scary because these people are becoming more and more sophisticated. I mean, I see, you know, scams coming through all the time. HMRC this week have had to shut down their WhatsApp and telephone calls because uh I think it’s to do with refunds because of scammers. And they’re saying that their systems are safe. I’m not quite sure what’s been going on, but it basically, if you want to get your refund, it’s all got to be online. They’re not taking phone calls and they are not uh using their WhatsApp helplines anymore. So yeah, I think it’s needed. I think everything needs to be AI. Oh, yeah. Um by the way, yeah.

[36:13] Sammie Ellard-King:

I’m not gonna like break the because sitting on the phone to HMRC for an hour on hard is like hell.

[36:18] Charlotte Baroukh:

I know, I know.

[36:19] Sammie Ellard-King:

And then when you get through, it’s like trying to pull teeth, trying to get the information you need.

[36:24] Charlotte Baroukh:

Yeah.

[36:24] Sammie Ellard-King:

So I I get that bit. It makes a lot of sense. I think, you know, it’s it’s just that decision sounds so bad when they’re like, oh, we’re cutting welfare, but we’re increasing taxation. It’s like that whole like positioning around it.

[36:41] Charlotte Baroukh:

I know.

[36:41] Sammie Ellard-King:

It’s like, well, we’re but we’re gonna we’re we’re gonna come we’re gonna spend loads of money so we can come after you more.

[36:46] Charlotte Baroukh:

I know, I know.

[36:47] Sammie Ellard-King:

It just makes sense.

[36:48] Charlotte Baroukh:

I think they’re just trying to weigh it up. I mean, they’re they’re saying they’ve got a 22 billion pound hole. And I think they’re trying to just I mean they’re trying to claw back. I think there was like I could be getting this completely wrong, but 600 million pound tax gap or something last year. So I think what they’re trying to do is they’re trying to make sure that that tax gap, which just doesn’t need to be there, yeah, i is just as small as possible. And then hopefully they can put that money towards welfare or what you know, whatever they choose to do.

[37:16] Sammie Ellard-King:

Yeah, hopefully, hopefully. I mean, like at least spend it right. I have my own issues around this whole like tax the rich thing because like So do I. I ha I the only reason I say that is I I don’t disagree with the actual taxation of the rich. It’s what they do with the money once they tax the rich that is gonna be a problem. Like, let’s say you manage to raise 20 billion pounds from taxing the rich. I just find that like you’ll probably spend a billion of that wisely and waste the other 19 billion. I mean, just like, you know, you just gotta look at, you know, what’s the railway from Manchester to London, like how much they’ve spent on that.

[37:50] Charlotte Baroukh:

But then this begs the question of obviously you’re seeing what’s going on in America with the Doge. Do you think that we should be having entrepreneurs or businessmen within Parliament to help them with this? Because Absolutely. Yeah.

[38:03] Sammie Ellard-King:

I think there’s not one person in the Labour cabinet that’s ever run a business before or it being a CEO. You need at least two or three to kind of like balance that out. Because you’re then making decisions on behalf of CEOs not knowing how a business works. It doesn’t make any sense. And then also like on these projects, people that have actually run these big projects and delivered them on time. I mean, look at the amount of these projects in Japan, which they’ve done, I think it’s they’ve done five or six the cost of HS2, and then way better, way faster, maybe way more efficient. So, you know, go and speak to those guys, you know, bring them in.

[38:39] Charlotte Baroukh:

But it’s also about just kind of understanding supply chains and just trying to be as productive with your money as possible. I saw Elon Musk the other day talking about how, I mean, this is America, this isn’t the UK, but talking about how there were surveys that were costing the US, I think it was a million pounds when it should have been costing them 10,000 pounds for online surveys. They were paying a million pounds when it should have been 10,000 dollars, but it should have been $10,000. Yeah. I mean, it’s insane. I’m sure that’s happening in the UK as well. But he was just like, how is this gone amiss? And I’m sure it happens. I’m not saying it’s fraud, I’m just saying it’s kind of a bit of economic incompetence. But yeah.

[39:15] Sammie Ellard-King:

It’s multiple billions spent a year on consultancy fees, which could have just got a few smart people in the room to make a decision and get on with it.

[39:23] Sammie Ellard-King:

Yeah.

[39:23] Sammie Ellard-King:

You know, uh it doesn’t need all of this ridiculous red tape around in the amount we spend. So that’s why I have the problem with the taxation of the rich mantra, because you haven’t thought through the next step. And if you have if you’ve laid out the full plan of it, then it makes sense. But for me, right now it’s it’s you know an issue. To lighten things up a touch.

[39:42] Sammie Ellard-King:

Okay.

[39:43] Sammie Ellard-King:

Um what’s the wildest thing you’ve seen with someone, you know, trying to claim on expenses for their tax?

[39:51] Charlotte Baroukh:

The wildest thing, to be honest, ours has more been that they um people don’t know what they can actually claim. So that’s more what it is. But we did have a wild one come in where people were, there was a person who was trying to claim um a new set of teeth.

[40:05] Sammie Ellard-King:

Teeth.

[40:06] Sammie Ellard-King:

Teeth.

[40:06] Sammie Ellard-King:

Yeah.

[40:07] Sammie Ellard-King:

So that was wild.

[40:09] Charlotte Baroukh:

Yeah, that was that was wild. I can’t remember what exactly it was about. It had nothing to do with their role.

[40:13] Sammie Ellard-King:

Maybe oh, nothing to do with their role. I was gonna say they’re not even on cameras.

[40:17] Charlotte Baroukh:

No, I didn’t think it was anything to do with their role. I think it was just like they were trying to expense it because obviously teeth are a big expense. And they were they were trying to expense it. But um, but we actually have it more the other way around that they the people don’t actually know what they can expense.

[40:32] Sammie Ellard-King:

Yeah, yeah. And what’s some things that like they don’t realise?

[40:35] Charlotte Baroukh:

Is there is there some like so working from home is something that so many people don’t realise. Um to be honest, business trips, yeah, you know, it but but it has to be for the you know, for business. Anything that you use for your business, even laptops, mileage, yeah, mileage. If you’re using it wholly and exclusively for your business, or even if you’re not, if you’re using it 50% for business, 50% personal, you can expense 50% of it.

[40:59] Sammie Ellard-King:

Yeah.

[40:59] Charlotte Baroukh:

It’s just being on top of it, keeping your receipts, because also it’s it’s very hard to expense something if you don’t have a record of it. Because if HMRC come back and say, Oh, hang on a sec, but what is this? Then they you you basically just have to have the documentation so you can, you know, you’re ready, you’re ready to fight. If they come back and say something, you need to just have it all ready to go. Yeah. And you’ll feel more at ease.

[41:19] Sammie Ellard-King:

Yeah, you will, you will. Because it like that’s one thing I’ve noticed now, and that’s why I’ve changed to do my accounts um we do them quarterly now rather than every yearly. So just like at least bringing the books up to scratch, because like these recent last two weeks, it’s like, what’s this transaction? What’s this transaction? I’m like, oh my god, like this is endless. And it was like hundreds, hundreds and hundreds. And you know, that it does you know, that takes three, four days out of the business. Uh I mean, just basically doing that.

[41:49] Charlotte Baroukh:

Yeah.

[41:50] Sammie Ellard-King:

So, you know, having a system in place where you can just see it up, see it all, automate it, just makes so much sense. Um now, obviously, we’ve touched on Pie, but is there anything about it that we haven’t touched, which is like really cool or something that you want to sort of talk about?

[42:05] Charlotte Baroukh:

I mean, it’s ever changing. So all the time we’re getting new um new revenue streams kind of integrated within the app. We have recently had the invoice digital invoices put through so you can send them directly out to your clients. Um I mean, the fact that it’s free is really good.

[42:21] Sammie Ellard-King:

Yeah.

[42:22] Charlotte Baroukh:

Another thing that we are uh creating at the moment is an AI accountant, which is going to be game-changing, hopefully, for the industry. Yeah. Um, but you know, it’s not good for us accountants, but it should be good for everybody else. Um, but yeah, just the fact that it’s free, the fact that it’s easy to use.

[42:38] Sammie Ellard-King:

Um is it solely for soul traders? Yeah, yeah.

[42:41] Charlotte Baroukh:

Yeah, it’s solely for soul traders, but you can put your employment income on it.

[42:45] Sammie Ellard-King:

Yeah. So if you’re if you’re a business owner and you want to run your personal expenses and self-assessment for it, you can.

[42:51] Sammie Ellard-King:

Yeah.

[42:51] Sammie Ellard-King:

Yeah. Cause what I saw was really cool was like obviously, you know, business owners, et cetera, or may might have a second property or something like that, and they don’t know what happens with that income. Yeah. That’s not wrapped up in a limited or whatever that might well be. And that’s a really great way of them going, oh, okay, you know, probably should take less out of the business at the moment or whatever.

[43:08] Charlotte Baroukh:

But also it’s the only, it’s the UK’s first self-assessment app. So the likes of, you know, QuickBooks, Zero, which are, you know, which are great, they’re not actually for sole traders.

[43:16] Sammie Ellard-King:

No. Yeah.

[43:17] Charlotte Baroukh:

So it’s the first, it’s the first that’s really geared to sole traders. And there are 12 million people who use HMRC’s online platform that they’re not going to be able to use because they’ve they’re starting to phase it out from next year. So it’s it’s an alternative. Yeah, where are they gonna go?

[43:32] Sammie Ellard-King:

Yeah, somewhere that’s free and keeps their costs down so they can keep more money in their pocket. Um, Charlotte, I’ve absolutely loved this. But um if you if people want to come find yourself, because you deliver some fantastic information on your socials, where where can people find you?

[43:45] Charlotte Baroukh:

They can find me on Instagram or TikTok, tax.queen.c. Um and I’m there to answer any questions. Yeah, I just love talking to people, helping them, and yeah. And also you can find me at Pie.

[43:58] Sammie Ellard-King:

Nice. It’s been a real pleasure. Thanks for coming on.

[44:00] Charlotte Baroukh:

Thanks for having me.