UK Edition
Alexis Sanchez: how much tax and NI will Man Utd's new star pay on £600,000-a-week salary?
Chilean footballer Alexis Sanchez became the highest paid footballer in Britain earlier this week when he signed for Manchester United, moving from Arsenal.
The Red Devils will be paying him a reported £600,000 a week, eclipsing the £280,000 weekly salary of new teammate Paul Pogba - up til now believed to be the highest-paid player.
Much is said of the eye-watering salaries of footballers but they, like everyone else, pay tax. So how much will Sanchez hand over to the taxman? And what will it be spent on?
Scott Gallacher of adviser Rowley Turton Private Wealth Management, which includes many professional sportspeople among its clients, crunched the numbers...
How much will he earn?
A dizzying sum. Sanchez’s salary works out at £32.2m a year, and even after tax will be £318,205 per week, according to Mr Gallacher.
That translates to £45,457 per day (£1,894 per hour, £31.56 per minute, or 52p every second - including those spent sleeping).
Mr Gallacher points out these figures assume he pays standard tax. Although increasingly difficult, there may be ways in which he could legitimately limit some of his liabilities.
And what will he pay in tax?
While Sanchez’s take home pay is eye-watering, so is his tax liability.
While most of us have a tax-free personal allowance of £11,500 (rising to £11,850 in April) this will not be extended to Sanchez. The allowance is reduced by £1 for every £2 of income over £100,000, meaning the entirety of his salary will be taxed.
According to Mr Gallacher’s calculations, he will pay a total of just over £14m income tax each year. Breaking this down by tax band he will pay 20pc tax on £33,500 of his annual income, 40pc tax on £116,500 of his income and 45pc tax on £31m – working out at bills of £6,700, £46,600 and just under £14m.
According to the website of ONE, the campaigning group, more than a third of that (£5m) will be spent on welfare and pensions. Sanchez will also contribute 18pc of his tax, totalling £2.5m, to the healthcare system each year and 13pc, or £1.7m, to education. A further £120,761 will be spent on overseas aid.
Sanchez will also pay £627,524 a year in national insurance contributions. Despite this huge outlay, Sanchez is unlikely to ever receive a British state pension – usually seen as the reward for paying NI.
This is because a worker must pay national insurance for a minimum period of 10 years to be eligible for the state pension. Sanchez signed for Arsenal in 2014, so unless he plays for a British club for another six years he will not be eligible.