Tax Avoidance

Although the phrase itself implies avoiding paying tax, there is a big difference between tax avoidance and tax evasion. Tax avoidance schemes have been commonplace for decades and they are in fact a legitimate way to reduce your tax bill.

Those in the higher tax brackets have long sought a way to reduce the amount of tax they pay as the highest rate of tax varies from government to government. To access the best ways of tax avoidance you really need to employ a savvy accountant who knows all of the ins and outs of tax avoidance for your particular circumstances. The thing you don’t want to do is to find out at a later stage that what you are doing is actually tax evasion.

In recent years the government have tried to restrict the amount of ‘grey hat’ tax avoidance, especially since it was revealed the that highest earners only seem to pay around 10% in tax, after using all means possible to avoid paying tax on their earnings.

Of course there are traditional ways of tax avoidance including pension and charitable contributions, which have both been reduced in value in recent years, making high earners seek even more ways of reducing their income tax bill.

Even the avoidance of stamp duty land tax has been curtailed by recent legislation to stop properties of high value being sold to ‘companies’ that have been set up specifically for that purpose.

There have also been those who have moved earnings overseas, whether that be to tax havens like Guernsey, the Cayman Islands or anywhere similar, to avoid paying tax on savings in those types of locations, but these are all on the hit list for those in the HMRC trying to reduce the income that the tax man gets.

For those who have moved overseas to become non-resident so that they can avoid tax in that way, new rules and high profile cases have made the case for non-residency a difficult one for anyone who has property, close relatives, family or any other ties to the UK. Tread carefully is the phrase for those who truly believe themselves to be non-resident.

For some charities, there has been an outcry over the change in the amount on which tax relief can be claimed for donations made. Tax relief on charitable donations is now restricted to either £50,000 or 25% of earnings. Charities have claimed that this will decrease their income and enable then to help fewer people but the question is how much effect will this have and will the cynics say that the donations were just to save tax?


Leave a Reply

Your email address will not be published. Required fields are marked *