Premier League footballers contribute more to the UK economy than you might think. Almost all of them are additional-rate taxpayers, meaning their startlingly huge salaries are taxed at 45%.
Take one of my favourite players, Mo Salah, for example. He’s said to be on a basic weekly salary of £200,000 at the club I support, Liverpool, meaning that around £90,000 a week goes to the Treasury in income tax.
At first glance, you might think the tax treatment of Salah, and hundreds of other players in the top two divisions, is a little unfair. That is until you realise he earns £5.72 million a year from their wages – after tax – and that’s before any bonuses or even discussing lucrative image rights.
Egypt’s talisman, Salah, won’t be lining up at this summer’s rearranged European Championships, which I cannot wait for – especially with the two semi-finals and the final itself being held at Wembley in July (and with England having the faintest sniff of winning a major trophy on home soil).
That’s a conversation I need to have down the pub, though. For now, what can we business owners learn from Premier League footballers and how do they protect as much of their income as possible?
Hard as it might be to believe, some elite players earn far more from image rights and endorsements than they do from their basic salary paid by their clubs. A minority even have their own brands.
Off the top of my head, Manchester City forward Raheem Sterling is the face of Gillette, Liverpool captain Jordan Henderson is Nivea’s poster boy and Barcelona’s Leo Messi appears on adverts in the UK promoting Turkish Airlines. They pick up millions of pounds for these deals, and you can bet your bottom dollar those won’t be the only contracts they have either.
Further down the football pyramid, image rights come into play at almost every professional club outside of the Premier League. These allow a club to use a player’s name and likeness (plus the actual individual on occasions) to market and sell the club’s wares and those of their sponsors.
What do these players have in common when it comes to tax? They often set up special-purchase limited companies through which they receive payments. That’s mainly because the corporation tax they pay on any profits is 19% – considerably less than paying 45% additional-rate of income tax and National Insurance contributions.
When the non-domiciled reforms kicked in from April 2017, it affected non-UK individuals who are resident in the UK for lengthy periods of time. Plenty of footballers fell into this bracket.
Non-UK domiciled footballers who reside in the UK can claim the remittance basis. Any payments from sponsorships or image rights are often split between UK and offshore companies, with the offshore element attracting no UK tax and very little tax, possibly no tax at all, in the offshore jurisdiction.
Given the amount of money we’re talking about here, it’s a no-brainer for British footballers to maximise their annual pension allowance and ISA allowances, including the £9,000 Junior ISA allowance for any children.
Using the £20,000 ISA allowance is small fry for them, but still worth doing. They can also pay £40,000 into their pension every year and any retirement income will be taxed at their marginal rate when they start drawing in. The current £1,073,100 lifetime allowance would approach quickly, though.
Those are all things you could and should be considering yourself, even if the only football you play is a bit of five-a-side down the park.
Getting expert advice
For any accounting advice or to discuss my services, call me on 07803 782100 or email me on firstname.lastname@example.org and I’ll be happy to help. Ask me nicely and I might even buy you a pint to watch England win the Euros this summer!