[Andy&Carol]

I feel I've read that taxes are high, but what do you get for your money - for example our UK Council Tax pays for policing, schools etc. I'm not sure where my Income Tax goes, I only know it goes!:exit

How much in the $ goes on Income tax, are there tax allowances and how are local taxes assessed? And a difficult final question, do you feel you're getting value for money?

Getting to the nitty gritty now, we've decided we want to live in NZ but need to carefully decide if we can afford to! :confused:

Thanks, Carole

[IanW99]

I feel I've read that taxes are high, but what do you get for your money - for example our UK Council Tax pays for policing, schools etc. I'm not sure where my Income Tax goes, I only know it goes!:exit

How much in the $ goes on Income tax, are there tax allowances and how are local taxes assessed? And a difficult final question, do you feel you're getting value for money?

Getting to the nitty gritty now, we've decided we want to live in NZ but need to carefully decide if we can afford to! :confused:

Thanks, Carole

For income tax check out Income Tax Rates (http://www.ird.govt.nz/how-to/taxrates-codes/itaxsalaryandwage-incometaxrates.html), you will see that although the rates are similar percentages they actually start earlier so more people end up at higher levels. There is also no threshold so you start paying taxes on any income level.

You don't pay council tax in NZ, instead it is rates (they are now starting to look into other solutions such as poll tax as the levels are getting quite high) - still seems to be less than the equivalent council tax though.

It should be noted that although income tax is higher there are less stealth taxes. There is a study that they do which works out how much of the year you need to work before you have paid off that years taxes and last time I compared with the UK the dates were so close as not worth considering. Or put it another way, overall the taxes are about the same.

Ian

[granger]

No national insurance payments in New Zealand.

[IanW99]

No national insurance payments in New Zealand.

Your comment appears a bit short, could you elaborate please?

There are no NI contributions in NZ, but then there is ACC, Kiwi Saver etc.

Certainly if you are a higher rate tax payer, you will pay more tax alone in NZ than the combined tax and NI contributions in UK, I assume this would be similar at the lower bands also?

There are a lot of other taxes to also tax into account e.g. GST is 12.5% whilst VAT is 17.5%

Ian

[Nick88]

Ian mentions Tax Freedom Day as a measure of the relative weight of taxation, and last year they fell on the same day for NZ and the UK. Sadly this year NZ is a whole week later (UK is 4 days later) so the govt has increased taxes again.

Here is the report by the accounting firm that calculates the figures

http://www.staplesrodway.com/index.cfm/Resources/Tools_and_Links/Tax_Freedom_Day

The graphs at the bottom of the page are quite telling...

[b&k]

The average NZ gross wage is $667/week. At this level, the average Kiwi can expect an income tax and ACC burden of 20.8%.

The average UK gross wage is £547. At this level, the average Brit can expect an income tax and NI burden of 26.0%.

Even at double average earnings, NZ is 27.7%, UK is 31.0%

However, in absolute terms, Brits will have more disposable income due to higher salaries.

[incredible hulse]

The average NZ gross wage is $667/week. At this level, the average Kiwi can expect an income tax and ACC burden of 20.8%.

The average UK gross wage is £547. At this level, the average Brit can expect an income tax and NI burden of 26.0%.

Even at double average earnings, NZ is 27.7%, UK is 31.0%

However, in absolute terms, Brits will have more disposable income due to higher salaries.

Are those figures right ? That makes the average UK salary around 28.5k - I thought it was around 23 ? If it is then as you say you would live like a lord in the UK on 28.5k in comparison to being in NZ on 34.5k

Even with 11% NI on the first 670 per week I would have expected with the tax free allowance, and then the 10 and 22% rates the total to be less than 26%

[incredible hulse]

There are a lot of other taxes to also tax into account e.g. GST is 12.5% whilst VAT is 17.5%

Ian
but VAT is exempt on a lot more items than GST is

[IanW99]

but VAT is exempt on a lot more items than GST is

Very true, although aren't they reducing the things that are exempt?

Anyway, it was just an example that there are a lot more taxes to consider other than just income tax, which is why I pointed them to the overall tax burden.

Ian

[IanW99]

The average NZ gross wage is $667/week. At this level, the average Kiwi can expect an income tax and ACC burden of 20.8%.

The average UK gross wage is £547. At this level, the average Brit can expect an income tax and NI burden of 26.0%.

Even at double average earnings, NZ is 27.7%, UK is 31.0%

However, in absolute terms, Brits will have more disposable income due to higher salaries.

I would also like to know the figures used here and the assumptions made? For example does this include family tax credits?

Not trying to prove you wrong, just curious as I know for a fact that I pay more income related tax in NZ than I did in UK.

Ian

[IanW99]

Are those figures right ? That makes the average UK salary around 28.5k - I thought it was around 23 ? If it is then as you say you would live like a lord in the UK on 28.5k in comparison to being in NZ on 34.5k

Even with 11% NI on the first 670 per week I would have expected with the tax free allowance, and then the 10 and 22% rates the total to be less than 26%

I think the figures used are either just wrong or are out of date?

For NZ the average wage in 2007 was $44,124 ($848.54 per week) and would pay $9430 ($181.36 per week) in tax which works out as 21.4%

For UK the average wage in 2007 was £23,764 (£457 per week) and would pay £5853.12 (£112.56 per week) in tax and NI contributions which works out as 24.6%

(figures taken from online calculators)

In both cases this does not include any credits that could be claimed.

Still shows (assuming that my math is correct?) the point that b&k is making (I think) that for average wages, NZ income tax burden is indeed less than UK.

If you work out the figures for double the average wages listed above then NZ is 29.11% and the UK is 29.06%

So it would appear that if you earn more than $88K then the income tax burden is higher in NZ (assuming this relationship holds).

Ian

[Tia Maria]

Children pay tax here which is irritating as mine have accounts in the UK, and have to fill out tax forms here to pay tax on these.

Its a bit harder to comment on the value for money question, but I definitely see more evidence of tax dollars being put to use in our area of NZ, than I did in our area back in the UK.

Cheers

Tia

[Andy&Carol]

Thanks eveyone. looking at the average incomes I'm pleased to say that in NZ Andy's salary will be above the average whilst here in the UK it's below average - and it's the same job, but that's all to do with the value placed on the role of Instructor in the prison service.

C x

[b&k]

Hi all,

My figures are based on governement published average salary figures for UK (http://www.statistics.gov.uk/cci/nugget.asp?id=285) and NZ (http://www.stats.govt.nz/products-and-services/hot-off-the-press/nz-income-survey/new-zealand-income-survey-jun-07-qtr-hotp.htm). Tax calculated for the UK using latest data from HMRC tax (http://www.hmrc.gov.uk/rates/it.htm) and NI (http://www.hmrc.gov.uk/rates/nic.htm). For NZ used rates from IRD (http://www.ird.govt.nz/how-to/taxrates-codes/itaxsalaryandwage-incometaxrates.html).

Assumed no benefits and standard tax codes. Also no pension contributions and contracted in for NI in UK. All calculations performed by me via spreadsheet.

As a double-check for UK see here (http://www.listentotaxman.com/index.php?calc=1&year=2007&age=0&add=0&taxcode=&period=1&ingr=28444&Submit=Calculate). For NZ calculation, see the spreadsheet attached below.

Income tax / NI burden UK = (4840.58+2556.84)/28444 = 26.0%

Income tax / ACC burden NZ = 7214.27/34684 = 20.8%

However, as mentioned above, income tax is not the only tax to consider to get the full picture. You should also look at benefits, VAT/GST and pensions (a large tax efficiency in the UK but not in NZ) and, particularly, the relative cost of goods and services in relation to disposable income.

[Jo Jo]

The average UK gross wage is £547. At this level, the average Brit can expect an income tax and NI burden of 26.0%.



Hi b&k,

I think the figure above of £547 is a typo - the figure you've just linked to (http://www.statistics.gov.uk/cci/nugget.asp?id=285) is £457.

Jo Jo

[IanW99]

Hi all,

My figures are based on governement published average salary figures for UK (http://www.statistics.gov.uk/cci/nugget.asp?id=285) and NZ (http://www.stats.govt.nz/products-and-services/hot-off-the-press/nz-income-survey/new-zealand-income-survey-jun-07-qtr-hotp.htm). Tax calculated for the UK using latest data from HMRC tax (http://www.hmrc.gov.uk/rates/it.htm) and NI (http://www.hmrc.gov.uk/rates/nic.htm). For NZ used rates from IRD (http://www.ird.govt.nz/how-to/taxrates-codes/itaxsalaryandwage-incometaxrates.html).

Assumed no benefits and standard tax codes. Also no pension contributions and contracted in for NI in UK. All calculations performed by me via spreadsheet.

As a double-check for UK see here (http://www.listentotaxman.com/index.php?calc=1&year=2007&age=0&add=0&taxcode=&period=1&ingr=28444&Submit=Calculate). For NZ calculation, see the spreadsheet attached below.

Income tax / NI burden UK = (4840.58+2556.84)/28444 = 26.0%

Income tax / ACC burden NZ = 7214.27/34684 = 20.8%

However, as mentioned above, income tax is not the only tax to consider to get the full picture. You should also look at benefits, VAT/GST and pensions (a large tax efficiency in the UK but not in NZ) and, particularly, the relative cost of goods and services in relation to disposable income.

Well your figures for the UK national average are wrong (digits appear transposed) the website says £457 where you have used £547?

Haven't checked the rest.

Ian

[b&k]

Sorry all - It should be £457 as pointed out. Bit of a typing error there by me :roll

The UK average income is therefore £21205/year and the figure for tax burden changes to 24.9%.

The basic point is the same - that you will pay more income tax in the UK than in NZ relative to your earnings

[IanW99]

Sorry all - It should be £457 as pointed out. Bit of a typing error there by me :roll

The UK average income is therefore £21205/year and the figure for tax burden changes to 24.9%.

The basic point is the same - that you will pay more income tax in the UK than in NZ relative to your earnings

If the average income is £457 times by 52 weeks works out as £23764 per annum not £21205?

The basic point is not exactly as you say, and should read more like "if you are are on the national average wage then you will pay more in income tax in UK than in NZ relative to your earnings".

From my previous calculations it shows that if you earn over a certain amount (well above national average) then this position reverses i.e. you start paying more in NZ than the UK.

Ian

[b&k]

Sorry, I've been doing this at work and it hasn't had my full attention. My spreadsheet does not use a simple calculation whereby weekly earnings are mulitplied by 52 instead it is setup for hourly rates and number of days worked per year to allow calculation of contract rates.

I was using 232 working days/year based on 4 weeks holiday and 8 bank holidays. In permanent work the holidays are paid therefore I have updated it to 260 working days/year (52 weeks at 5 days/week) to give the correct figure.

I have investigated your idea that the more you earn relative to the average national wage, the higher proportion of tax will be paid in NZ and found that the opposite is true. I have attached a further spreadsheet with my findings.

The only time you would pay a higher proportion of tax in NZ versus the UK is if you are earning less than 68.6% of the national wage (£313.54/week in the UK, $457.56/week in NZ). Above this figure, you will always pay less tax in NZ. For high multiples of average wage, this also makes logical sense as the highest marginal rate in NZ is 39% (39% tax and no ACC above $99818) whereas in the UK it is 41% (40% tax + 1% NI).

Please can you check the figures and let me know if I have made any mistakes.

[IanW99]

Haven't looked at your spreadsheet yet, may have a look when I have a little time later.

Did a quick re-check of my original figures and it still shows a higher tax burden in NZ for higher wages (as said before I'm sure that this is in fact true as I have to pay more in NZ than the UK).

If I go to one of the online tax calculators for UK and NZ, then this is the information that I get.

Assume a salary of £50K, gives a net wage of £35173.60, which equals 29.65% of the total.

If I now assume that I get a salary of NZ$100K (figures on this forum suggest that you should aim for twice your UK salary), net wage would be $69730 = 30.27%

Even if I assume that you would get a better salary in NZ e.g. NZ$150K would be net wage of NZ$100,230 = 33.18%

I guess if you earned less than twice your UK salary then you may pay less in Tax? If you are just working on proportions of average wage then this may be why we are seeing a difference here?

Maybe we could use a few real world examples?

Ian

[b&k]

Hi Ian,

Your calculations are correct and different to mine based as we are using different assumptions.

If you were earning £50,000 in the UK and we're offfered a job at $150,000 in NZ, you should take it as you'd be much better off relative to the average person (even if you pay a little more tax).

This is all theoretical and there are a lot of variables to consider. For example, is the average Brit better off than the average Kiwi to start with?

The more I think about these comparisons, the less relevant they seem to become. If your intention is to move to NZ and have a the same (or more) disposable income as you had in the UK, then you will probably be disappointed.

I lived in NZ for 6 months and know that somethings are cheaper and some more expensive. It's more a question of what is important to you. For example, in NZ access to the outdoors is much easier, the weather is better, the country is less crowded, people are more friendly, there are more beaches and sporting facilities are better.

On the other hand, there is less history and culture, a lack of infrastructure, the nearest country is 3 hours away, the nearest country is Australia (sorry, couldn't resist :D ), TV is rubbish and your family will be not be nearby.

These items will be perceived differently and will have a different economic value to each individual and this is the calculation that you should consider.

I have posted elsewhere a spreadsheet to calculate what you need to earn based on known costs. I'd suggest to all that you research the costs and see if you can earn the necessary salary to meet these.

However, the final calculation is one of lifestyle. A very simplified example - can you sacrifice being able to afford that flat screen TV to be able to run along the beach each morning?

[IanW99]

:nice1

Ian