Pig Dog 05 - Coda

src/blog/2022-01-02-pig-dog-05.gmi

@@ -0,0 +1,155 @@
+# The Capitalist Pig-Dog Blog: Coda
+
+## Final apologies
+
+The pig-dog blog fizzled out six years ago. This was mostly because I was too
+lazy to collect those receipts, and the longer I left it, the more life changes
+took me away from the picture I'd already painted. I always felt a nagging urge
+to "finish" the series in some way, though - and now I think I can!
+
+## Consumer activism
+
+This is where I left the previous pig-dog article. There is Ethical Consumer
+Magazine for those interested in the topic, but I'll leave it at "can't be done,
+cap'n".
+
+=> https://ethicalconsumer.org Ethical Consumer Magazine
+
+Not unless you're rich, anyway.
+
+Ethical Consumer is something of a mixed bag, and is far too credulous on some
+topics (biodynamic eggs in the most recent issue!), but is the best resource I
+know for the topic. They also show their working, so you can prioritise what
+matters for you, and work around any shortcomings in their process or
+conclusions. Definitely the poster child for this kind of thing.
+
+## Changes
+
+In November 2015, I began a new relationship. This was followed in 2016 with a
+new job; in 2017 by moving to Shetland; in 2018, a proposal; in 2019, a
+wedding; in 2020, a pandemic(!); and in 2021, a baby.
+
+In 2022, we're moving back to Yorkshire. Each of the above could be its own
+series; I'll see if I get to them, but don't hold your breath. However, we're
+returning in very different financial circumstances to those we left in.
+
+## Debt
+
+All paid off. Every penny. Including student loan, car PCP, and mortgages.
+
+How, you ask? Simples. Share options. The new job provided me with some, and
+they panned out over the next 5 years. I'm now ridiculously wealthy by any
+standard.
+
+The UKPersonalFinance reddit has a website with a handy flowchart,
+based heavily on the Bogleheads methodology, and the options permitted me to
+skip right to the final step!
+
+=> https://ukpersonal.finance
+
+Mortgages, plural, you ask? Well, I peaked at 3 - the original house in York,
+our house in Shetland, and the the new one in Yorkshire. My sister has been
+living in the first (rent-free, I hasten to note), and now the mortgage is paid,
+I'm transferring it to her legally. The second we bought with a deposit
+contributed by my now wife's parents, but it's turned out to be a money pit -
+we've spent at least 50% of the original purchase price on repairs, and the saga
+continues. We'll be selling it at a significant loss, and I can't wait.
+
+=> /img/pig-dog-05/wall-state.jpg Over half the walls are rotten
+=> /img/pig-dog-05/groundwater-state.jpg Groundwater is eating the foundations
+=> /img/pig-dog-05/foundations-state.jpg The foundations need replacing
+=> /img/pig-dog-05/chimney-state.jpg And the chimney leaks
+
+The new house, we bought with a mortgage, with the deposit coming from sold
+shares,  but were able to pay it off in full a couple of months later by selling
+even more shares! We plan to stay there for at least 5 years, as with Shetland,
+then re-evaluate. The off-grid life increasingly appeals to us both, and this
+house won't do for that, but it's a fine place for the first few years of a
+child's life.
+
+## Equity
+
+As mentioned above, the new company had a share option scheme. Bytemark had
+introduced one toward the end of my time there, but the two were very different.
+I'd already internally discounted the Bytemark one to £0 because it seemed very
+obvious to me that it would never pay out - you had to be at the company right
+up until its termination or flotation if you wanted to exercise the shares. I
+already had itchy feet at the time, and the best-case scenario was "only" around
+the £100,000 mark anyway. GitLab's option scheme was much better - you could
+exercise at any time, for a start - but it was really an afterthought when
+making the decision to switch.
+
+(As it happens, Bytemark was subsequently bought out by iomart. I switched in
+August 2016, and the purchase was Octover 2018, so winnings were in my future,
+whichever choice I made. However, with the benefit of hindsight,
+switching to GitLab was absolutely the right financial choice to make.)
+
+=> https://blog.bytemark.co.uk/2018/09/04/moving-up-the-stack iomart acquires Bytemark
+
+I'm easily on course to make more than a million pounds after tax from the
+GitLab options. The salary is a drop in the ocean by comparison.  Naïvely, I can
+model this as getting more of my "fair share" of the work I've put into a
+company - salary in no way reflects the value added by labour - but the truth
+is simpler, and sadder.
+
+I joined early on, and got more share options than people who joined later. The
+price of the shares has been doubling or tripling every ear, as has the number
+of employees, but I get a greater share of the total than those who came later.
+It follows that my wins come at their expense - they work, hundreds of them, to
+increase the company's value, and I get a cut of that.
+
+Bleurgh.
+
+## Taxes
+
+Typically, if an employer gifts you a share, that is treated as income and taxed
+at acquisition time through PAYE at 19-46% income tax, plus 12-2% national
+insurance. With share options, you buy them at a discount, and the difference
+between discounted price and market value is taxed as income. Once you own it,
+further appreciation is taxed at disposal time through capital gains tax - at a
+much lower rate, sometimes as low as 10%.
+
+The Bytemark scheme was very carefully worded to exclude any possibility of
+paying income tax rates, and most of the provisions I disliked in it came from
+that choice - it was made to fit the mould of an Enterprise Management Incentive
+scheme, which would attract CGT instead of income tax.
+
+=> https://www.gov.uk/tax-employee-share-schemes/enterprise-management-incentives-emis EMI
+
+GitLab's options did no such thing, so my notional tax rate on the gain has
+been 48%. In addition to my million, the tax authorities get themselves a
+million as well. The precise number is difficult to figure out - the tax code
+pays a *lot* of attention to people making this kind of money. In particular,
+the personal allowance reduces to 0 and the pension allowance reduces to 4,000,
+although you can now use up allowance from previous years instead. Various other
+things suddenly become tax-deductible too, and gift aid starts to make sense,
+among other things.
+
+Still, the majority of what ukgov and scotgov do is good stuff, so this is fine.
+
+When I joined GitLab, I had the option to "early exercise" my shares. That would
+have cost about £7,000, and - through shenanigans - led to my winnings being
+taxed entirely through CGT, at 10-20%, instead of the 48% rate I got. I even had
+the money at the time - by coincidence, my car's PCP was up, and I could either
+pay off the loan portion, or early exercise the shares. I chose the former, and
+even with hindsight, can't being myself to regret it. I still have the car, it
+works great.
+
+It does sting a little that other people were able to get the lower rate,
+though. If anything, there could be less of that.
+
+## Future
+
+How does one convert a windfall into an income? Through investment! This is
+more bleurgh-inducing skimming off of the work of others, as with the share
+options themselves; the alternative is to see inflation erode the value of the
+cash. I could talk about more-ethical vs less-ethical investments, but
+fundamentally, they all work on this premise. Not ideal.
+
+Now I'm actually a capitalist pig-dog, my Ethical Consumer magazine has
+suggestions I can follow without pain, so I'll be looking into that.
+
+Got to raise a child! I have parental leave until March, at least.
+
+As ever, I can hope I'll have more time/enthusiasm for writing in this new year.
+Time will tell.