If you think you stop paying taxes when you retire, then think again and be ready to see the tax man swipe a large slice of your income.
Of course, where you live as an expat determines how much tax you pay, but assuming your home is somewhere in Europe, where tax rates are pretty much the same in each country, around a third of your retirement income will disappear as tax.
Taking the UK as an example, a retired household pays out 31% of annual retirement income to HM Revenue & Customs.
The official numbers are 7.1 million households pay £59.232 billion into the Treasury coffers as direct or indirect tax, according to the latest government data analysed by equity release firm Key.
The statistics also reveal that the average retirement income is £25,051 a year, with a £7,971 tax bill leaving £17,593 to spend.
The analysis showed that working households pay more tax than retired ones – 34.8% of income – but earn twice as much, an average £50,353.
Poor pay more tax
The analysis also suggests poorer retired households shoulder a larger tax burden – with the lowest 10% having an income £8,725, but a tax bill of 48%.
The wealthiest 10% of households have an annual income of £66,212 and pay £19,689 in tax, which is equivalent to 30% of income.
The two big hidden taxes are VAT – charged at 20% on most purchases – and Council Tax. Income tax sits between them.
Will Hale CEO at Key said: “Paying tax does not stop when you stop working and retired households have to keep on budgeting and planning ahead on how to pay income tax and council tax bills.
“The average bills from direct and indirect tax that retired households face take a substantial bite out of incomes underlining how important it is to consider all potential sources of income in retirement.”
Income and tax for retired households
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