How to pay no taxes on your income

[vand]

OK, its taken a few weeks for me to get everything set up and in place, but now I have done so and I couldn't be happier.

How I pay no taxes on my income:

Gross annual Income: 46k from dayjob

- Put everything above 19k into my work pension scheme via salary sacrifice (this means contributions come from my gross pay). Together with the bog standard 5% employer match, that fills out 30k into my work pension. I would then ordinarily pay standard income tax of £1300 and NIC of £1244 on that 19k, and get to take home £16,457.

- Claim £243 per month in childcare vouchers, again this is a salary sacrifice scheme where I can buy the vouchers from gross salary. This further reduces my income tax bill to £715 and NICs to £895 and my take home pay to £14,475.

- From the £14,475 net take home, I bung 8k into a separate private pension (SIPP), which automatically claws back 20% tax relief, so I get £10k in total. That already more than offsets the total income tax + NICs that I paid, and I have fully used my annual pension allowance of 40k (30k work pension + 10k SIPP). I have 14,475 - 8000 = £6,475 left of my take home pay per year (and I haven't even made use of any carry-forward).

- Put £2.5k into daughter's JSIPP, again I get 20% tax relief of £625 so £3125 gross goes in, and leaves me with £3975 left of my take home pay.

 

In total I get:

30k pension
10k SIPP
2.9k childcare
3.1k JSIPP
£3975 take home
--

Total: £49,975 from a 46k salary

 

Now, I'm a pretty frugal chap, but £3975 a year for living expenses won't cut it. The key is that I do have a decent tax-free side income from Advantage Playing which makes a lot of this possible. "Unfair - that's a unique position and so not applicable to me" I hear you say... well, maybe, but there are other hustles you can do to earn money on the side and thus similarly optimise your "official" finances, eg you can rent out up to 2 rooms in your home for up to 7500/pa each without having to pay any tax, or if you have a situation where you can take voluntary redundancy and line up another job pretty quick, you get a tax-free lumpsum to live off for however long you can make it last while similarly arranging your tax affairs from your new job.

[Goldfinga]

Will you be my financial adviser please..? free of charge of course for being a silver forum member!!😁

[Martlet]

Aren't you over cooking this, putting away cash in SIPPs you cant spend, that isnt taxed anyway in the annual allowance?

[vand]

37 minutes ago, Martlet said:

Aren't you over cooking this, putting away cash in SIPPs you cant spend, that isnt taxed anyway in the annual allowance?

 

Yes, its a bit convoluted and I split between my SIPP & work pension for a couple of reasons-

First, because the SIPP allows me to buy into some funds which I can't in my work pension, and secondly you can't salary sacrifice down below minimum wage which is about £16k, which wouldn't be enough to fill out the 40k allowance

I'm not worried that I can't spend my SIPP right now as I can cover living expenses from other income.

There are different schools of thought on this, but imo SIPP & Pensions should be the first thing that are funded because these are the most tax efficient wrappers for the vast majority of scenarios. 

 

[AuricGoldfinger]

I do commend your efforts and i also live well within my means. However i choose to live a comfortable lifestyle rather than that of someone who isn’t necessarily earning a decent wage, but like you i turn saving and investing practically into a hobby. 

Not knocking you at all i admire your commitment, i just know theres certain money I will enjoy more now than when i am in my 60s. I think your approach to being so tax efficient to suit your specific needs is excellent.

[Stuntman]

Well done - and I agree with @AuricGoldfinger too about perhaps enjoying jam today a bit more, rather than having plenty of jam tomorrow 😉

Is your advantage play to do with Blackjack?  (I do enjoy Blackjack, although I am just a perfect basic strategy player plus a few of the illustrious 18 tweaks).

[vand]

1 hour ago, Stuntman said:

Well done - and I agree with @AuricGoldfinger too about perhaps enjoying jam today a bit more, rather than having plenty of jam tomorrow 😉

Is your advantage play to do with Blackjack?  (I do enjoy Blackjack, although I am just a perfect basic strategy player plus a few of the illustrious 18 tweaks).

Not Blackjack.. I specialise in "bookie bashing" mainly on horse racing. It's hilarious whenever I see people saying "you might as well go and blow it all on the horses" as a synonym for throwing your money away, because I and the odd other person like me who knows what they're doing actually make a good living from it. I have mentioned it several times before, like here.. 

People may not believe that it's possible to create a good fairly steady income from horse racing without actually knowing anything about horse racing and studying the formbook, but I assure you so long as you have a reasonable grasp of maths and understand the rules of racing it is.  I don't know what sort of a ROI you can get on blackjack, but recently I went through my records and it showed that since the start of 2018 I have extracted an ROI of 13.5% and made considerably more from this activity than my dayjob... which is one reason why I can adopt this tax strategy

[Stuntman]

^^^ cheers for that - really interesting, I have just read through both threads and one of the others that was embedded within it 😊

 I also have some personal history and experience in that regard.  I worked as a betting shop cashier for a year and actually got involved with price setting for this bookmaker for a niche sport for a major event once (because I had previously exploited a price asymmetry in that sport with one of our bookmaking competitors...). 

And about 7 years ago I built a database for a professional gambler who wanted to interrogate a year's worth of UK horseracing data to look for cohorts of races (selectable by multiple criteria) where it had been possible to make money using full cover Tote Trifectas.  From memory, we found three such cohorts (based on type of race, trip, ground, number of runners and a few other criteria).   I also built him a database where you could look at individual horse's racing history to find patterns for beaten favourites, so he could consider laying the favourite.  All fascinating stuff.  The chap was/is also a professional poker player and is sometimes one of the commentators on the TV channels.  An interesting character all-round.  He made his money in newspapers in the 1980s.

I also agree with the poster (I think it was sovereignsteve) who said that darts matches were a potential in-play goldmine.  I have said this to other people for years!  Interesting that tennis seems to exhibit the same properties.

I haven't had a proper bet for years but I totally agree with you that there is money to be made consisitently if you have knowledge, skill, patience and discipline.  Keep up the good work!

[h103efa]

23 minutes ago, Stuntman said:

And about 7 years ago I built a database for a professional gambler who wanted to interrogate a year's worth of UK horseracing data to look for cohorts of races (selectable by multiple criteria) where it had been possible to make money using full cover Tote Trifectas.  From memory, we found three such cohorts (based on type of race, trip, ground, number of runners and a few other criteria).   I also built him a database where you could look at individual horse's racing history to find patterns for beaten favourites, so he could consider laying the favourite.  All fascinating stuff.  The chap was/is also a professional poker player and is sometimes one of the commentators on the TV channels.  An interesting character all-round.  He made his money in newspapers in the 1980s.

 

Would love to pick your brain one day!

I actually use a GGs database, to build a portfolio of dynamic systems based on past stats, trends and patterns that have kept me in good stead for the last 5 years. Trying not to backfit using the filters is the hardest thing!

[Stuntman]

I looked at the GGs database back in 2012-13.  Mine was better 😋

Edit: my gambler chap got the data from a contact he had at Associated Press.  The info was very well-organised, which made my job easier. I could get to race-level data fairly quickly with minimal processing.  The horse-level data was harder, because I had to identify which one went off favourite, whether it was an outright, joint or co-favourite, and then when the data for any particular race started and ended.  Think of it of cutting decks of cards where each deck is a different size, and then finding one or more aces in each of these decks!

 

[h103efa]

4 minutes ago, Stuntman said:

I looked at the GGs database back in 2012-13.  Mine was better 😋

horseracebase

[Stuntman]

Oh, that name rings a bell as well.  The endgame for my professional gambler was that he wanted to sell my/his intellectual property to a larger company for a colossal sum of money.  He is still touting it, I think.  I'm still waiting for my ship to come in... 😉

(and see my edit above!)

[vand]

There is an excellent horse-racing database here http://adrianmassey.no-ip.org/web1/db3/thaccess.php?fav=1&odda=1&flat=-1&p1=ejlub2JvZHl1dQ==&p2=NWw5Wm5vcGFzc3dvcmRd&p3=MTQ3OTkyMDAwNA==

 

Personally I think a stats-based system is a load of rubbish. Actually I think all punter-systems are a load of rubbish, because the market is efficient, on the whole. Horses win according to their odds over the long term, but if you are paying the bookie margin then you are losing on the whole over the long term

What I do is I exploit +EV with each-way betting and a few other techniques. In a small minority of races an each-way bet is a +EV proposition because the shape of the race gives the horse a much better chance of landing a place than the the odds you are are getting as derived from a fraction of the outright win price. If that doesn't mean anything to you then consider what would happen if you dropped Usain Bolt into high school track and field sprint race with 8 runners and opened a betting market on it. 7 runners would be priced at 1000/1 and so taken as an each-way bet you would be getting 200/1 @ 1/5th odds on any of those runners finishing 2nd or 3rd, whereas the "true odds" of them hitting 2nd or 3rd might actually be 2/1 or 3/1.

[h103efa]

1 hour ago, vand said:

There is an excellent horse-racing database here http://adrianmassey.no-ip.org/web1/db3/thaccess.php?fav=1&odda=1&flat=-1&p1=ejlub2JvZHl1dQ==&p2=NWw5Wm5vcGFzc3dvcmRd&p3=MTQ3OTkyMDAwNA==

 

Personally I think a stats-based system is a load of rubbish. Actually I think all punter-systems are a load of rubbish, because the market is efficient, on the whole. Horses win according to their odds over the long term, but if you are paying the bookie margin then you are losing on the whole over the long term

What I do is I exploit +EV with each-way betting and a few other techniques. In a small minority of races an each-way bet is a +EV proposition because the shape of the race gives the horse a much better chance of landing a place than the the odds you are are getting as derived from a fraction of the outright win price. If that doesn't mean anything to you then consider what would happen if you dropped Usain Bolt into high school track and field sprint race with 8 runners and opened a betting market on it. 7 runners would be priced at 1000/1 and so taken as an each-way bet you would be getting 200/1 @ 1/5th odds on any of those runners finishing 2nd or 3rd, whereas the "true odds" of them hitting 2nd or 3rd might actually be 2/1 or 3/1.

As well as system betting, which i like doing as a hobby, i do partake in the occasional EV positive EW betting etc to bring a steady amount in. I used to do quite a bit of matched betting back in the day when the MSE forum was busy and informative and before Mike and his profit maximiser. Much more difficult now that i've exhausted all my named accounts, my sisters, my wife and running just a few in my dad's name which i treat with cotton wool to ensure they stay a bit longer before receiving that dreaded email.

At one stage, using the odds monkey portal, i used to not even bother laying off the bets, lost a valuable 365 acct after a few weeks. No time to do much of that, hence why the system betting is OK with me. Yearly profits so happy days!

 

[PansPurse]

That's a dizzying amount to be putting into a pension plan. Yes it's there but in my case I'm not going to retire for well over a decade and 4-5k a year is an impossibly tight budget unless you already own your home and have no children.

[Stuntman]

7 hours ago, vand said:

Personally I think a stats-based system is a load of rubbish. Actually I think all punter-systems are a load of rubbish, because the market is efficient, on the whole. Horses win according to their odds over the long term, but if you are paying the bookie margin then you are losing on the whole over the long term

What I do is I exploit +EV with each-way betting and a few other techniques. In a small minority of races an each-way bet is a +EV proposition because the shape of the race gives the horse a much better chance of landing a place than the the odds you are are getting as derived from a fraction of the outright win price. If that doesn't mean anything to you then consider what would happen if you dropped Usain Bolt into high school track and field sprint race with 8 runners and opened a betting market on it. 7 runners would be priced at 1000/1 and so taken as an each-way bet you would be getting 200/1 @ 1/5th odds on any of those runners finishing 2nd or 3rd, whereas the "true odds" of them hitting 2nd or 3rd might actually be 2/1 or 3/1.

I kind of agree with you about punter systems, but what my gambler chap was trying to do was find an edge, akin to card counting in Blackjack or holding a pair of aces in Poker.  In other words, he would aim to bet selectively when the EV was likely to be positive.  I built him something very selectable so that he could search for patterns against his particular hypotheses.

Yes, I totally get the each-way positive EV idea and have exploited this myself in the past, notably in athletics in the 1980s and 1990s, so your analogy is well made!

[vand]

20 hours ago, PansPurse said:

That's a dizzying amount to be putting into a pension plan. Yes it's there but in my case I'm not going to retire for well over a decade and 4-5k a year is an impossibly tight budget unless you already own your home and have no children.

I am not living on beans and toast on £4-5kpa, I'm currently getting by happily on about £15kpa. I have other income.. see my other posts in this thread. Actually hoping to also make enough to fully use my ISA allowance this year, but we'll have to see how it goes.

This sort of radical personal finance commonly pursued in the early retirement community.. these aren't people on minimum wage, but most of them they aren't on CEO wages either. They're mostly just middle to upper-middle earners. It just takes a bit of creativity, ingenuity and hustle, and maybe also a bit of career focus to either get your main earnings up, your side-hustles going, or ideally a combination of the two 

 

[ChrisSilver]

You're going to be sorted when it comes to retirement  

[Pipers]

So that's what they call it these days 'advantagd player' good for you vand. Years ago when I was younger I used to get on the horses I new quite a few of the stable staff, some trainers and some on course bookmakers.  I would target certain races, bet at the right time of year.  Also horses are animals not machines as anyone who bets knows. 

Apart from horse racing I tried to get on other sports or events,. I made quite a bit on Rugby League and boxing.   Though in the long run it was not worth the work though I made a bit. 

[vand]

On 17/05/2019 at 13:46, h103efa said:

As well as system betting, which i like doing as a hobby, i do partake in the occasional EV positive EW betting etc to bring a steady amount in. I used to do quite a bit of matched betting back in the day when the MSE forum was busy and informative and before Mike and his profit maximiser. Much more difficult now that i've exhausted all my named accounts, my sisters, my wife and running just a few in my dad's name which i treat with cotton wool to ensure they stay a bit longer before receiving that dreaded email.

At one stage, using the odds monkey portal, i used to not even bother laying off the bets, lost a valuable 365 acct after a few weeks. No time to do much of that, hence why the system betting is OK with me. Yearly profits so happy days!

 

yes, it's not possible to do this online anymore for any sustained length of time. The bookies know how to weed out value seekers and shut them down. 

I do 100% of my betting in-shop.. I have meticulously complied a map of all bookie shops in London. It took a LONG time but it has paid me back a hundred fold and is literally priceless to me. I work different area on different days, never frequenting the same shop too much. 

Just as an example of how profitable it can be, I netted £600+ profit on yesterday's 3:50 Naas race with £120 EW down on the 3rd place horse. Got on at 66/1, laid the win off for 55.0 and the 14.2 on the place was arbing at around 7.0 on the exchange, so a better than 100% arb on the place meant that I could give myself a risk-free chance at a payout if the horse managed to finish in the first 3 in an 8 runner race, which it duly obliged. Not bad for literally a couple of hours' work. Of course its not always this easy.. you need to wait for the right opportunities to come along, and even when they do more frequently than not the results don't go your way, but occasionally when they do and it all comes together it makes it worthwhile.

[vand]

And.. this is why I have no qualms about having a 0% marginal tax rate:

 

https://www.bbc.co.uk/news/uk-48746609

[Murph]

I used to dabble a bit in the horse racing or any other event I thought I saw good prices at years ago.  But there were a lot more independent bookie shops then and you could sometimes find the odd one with much better odds.

Going round them and studying what some trainers were prone to do at which courses along with the horses form if it had run recently but I only did it in quiet periods at work where I had the time to spend.  Beats sitting twiddling your thumbs all day.  Some weeks I didn't find any worthwhile bets and I certainly couldn't have lived on my winnings as trying to place a very large bet on a small race in a small shop would often result in them either refusing the bet or dropping the odds but it gave me a little bit of spare spending money.

 

Don't the odds drop when you've placed a couple of bets at different shops with today's internet and the ability for shops all to be linked?

[vand]

Getting your bets on is an art in itself. It has always been this way... the bookie is always trying to determine if they are taking sharp money or mug money. Yeah, you can't go into a bookie and expect them to lay a £100 bet on a 100-1 shot. You gotta be coy about how you do it - you want them to think that you're a dumb schmuck who cant figure out what an overround is. I do all my betting in-shop and usually break up my bets over lots of different shops. Also using the betting terminals rather than manual bets. You want to try to keep a low profile. These days you have a readily available "perfect" market in the Exchanges, where market prices are set according to the wisdom of the crowds. They have changed the game and quite easily allow sharps to know when they are getting value.