TAX AVOIDANCE OR TAX EFFICIENCY
Recent press coverage featured by Citywire Money once again highlighted that the tax authorities are looking into well-known footballers who appear to be using tax avoidance schemes
However, there are very fine lines between tax avoidance and tax efficiency.
Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended,
It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter – but not the spirit – of the law,
The simplest way of ensuring you do not fall into any traps is to look at the other option – tax efficiency.
Very few people like paying the tax they do, especially when taking a few simple steps and some sensible planning can quite legitimately reduce the amount they hand over to the Treasury.
The first and, perhaps the most obvious is to invest in Individual Savings Accounts (ISAs). The allowance for the 2018/19 subscription is £20,000. Whilst this does not seem a massive amount it is worth noting that if this allowance is regularly utilised, a nice nest egg could be accumulated in a relatively short period. All the future returns will then be tax free.
Another consideration is to contribute more into a pension plan. Any contributions paid by you benefit from 20% tax relief at the time of payment.
If you are a higher rate tax payer, you can claim the difference through your tax return or by contacting HMRC. If you are an additional rate tax payer, you need to claim the difference through your tax return.
Of course, we cannot escape all taxes but, careful professional planning can make sure it is not more than it need be.
To discuss further please contact Citrus Financial.
It should also be noted that tax treatment varies according to individual circumstances and is subject to change.
Source: http://citywire.co.uk/money/hmrc-probes-181-football-stars-over-tax-avoidance/a1110862 16 April 2018
Author: Helen Loder
Co-Director of Sevenoaks Mums