This article can be read by selected Monevator members. Please see our membership plans and consider joining! Already a member? Sign in here.
The tax year runs from 6 April to 5 April the next year. This means the most crucial UK tax deadline occurs in April.
That’s because there are various annual allowances and tax reliefs you need to make the best of to legally mitigate your income tax bill and to stop excessive taxes sapping your investment returns.
And most of these run on the basis of ‘use it or lose it’ by 5 April.
No good moping in June that you should have filled your 2023-2024 ISA allocation by 5 April, but you were too preoccupied by the Six Nations rugby!
No point cursing when you pay £500 in capital gains tax in July because you didn’t defuse it in March!
Of course you know this. You’re the sort who reads Monevator.
But it’s all too easy to overlook something.
We’re all only human. For now at least.
So while we wait for our A.I. overlords to steal this job from us too, here’s a checklist of what you need to think about as the UK tax deadline draws near.
Follow the links in each section to go deeper.
ISA allowance
The annual ISA allowance is the maximum amount of new money you can put each year into the range of tax-free savings and investment accounts that comprise the ISA family.
The ISA allowance for the current tax year to 5 April is £20,000.
You cannot carry forward or rollback this ISA allowance. What you don’t use in the tax year is lost forever.
ISAs are a superb vehicle for growing your wealth tax-free. But the rules are fiddly – seemingly made up by a bureaucrat with a grudge against mankind.
My co-blogger wrote the definitive guide to the ISA allowance.
Pension contributions annual allowance
There is a limit to how much money you can contribute to your pension in a given tax year while still receiving tax relief on those contributions.
This is currently £60,000. It is sometimes referred to as the pension annual allowance.1
Saving into a pension is mostly a tax-deferral strategy. That’s because you’re eventually taxed on pension withdrawals, unlike money you take out of an ISA tax-free.
In theory this makes ISAs and pensions equivalent from the perspective of tax.
In practice though, the fact that you can also draw a special lump sum from your pension tax-free gives pensions an edge in tax-terms – albeit at the cost of locking away your money for years.
Weigh up the pros and cons of each tax wrapper. We think most people should do a bit of both.
You can reduce your marginal tax rate by making pension contributions, if you can afford to go without the money today. Those on higher rate tax bands in particular should do the maths.
Personal savings allowance
Under the personal savings allowance:
- Basic-rate taxpayers can earn £1,000 per year in savings interest without having to pay tax.
- Higher-rate taxpayers can earn £500 per year.
- Additional rate taxpayers don’t get any personal savings allowance.
Back when interest rates were very low, these savings allowances seemed quite generous.
But rising rates have changed everything. Even interest on unsheltered emergency funds might take you over the personal savings allowance and see some of your interest being taxed.
Redo your sums. Higher rate tax payers might look into holding low-coupon short duration gilts instead. Recently these have offered a lower-taxed alternative to savings interest.
Dividend allowance
As of 6 April 2023, the annual tax-free dividend allowance was reduced to £1,000.
It’ll halve again from 6 April 2024 to £500 for the next tax year.
Dividends you receive within the tax-free dividend allowance are not taxed. But breach the allowance and you’ll pay a special dividend tax rate on the rest, according to your income tax band.
You can avoid the whole palaver by investing inside an ISA or pension.
Capital gains tax allowance
Everyone has an annual capital gains tax allowance, or ‘annual exempt amount’ in the lingo of HMRC.
This allowance is £6,000 until 5 April 2024.
Alas the allowance will then be halved to £3,000 from 6 April 2024. After that it will be frozen.
Capital gains tax is levied on the profits you make when you sell or transfer most assets. These assets include everything from shares and buy-to-let properties to antiques and gold bars.
You can shield your gains from capital gains tax by investing within ISAs and pensions. Go re-read the relevant bits above if you skimmed them!
EIS and VCT investments
You can also reduce your taxes by investing in Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS).
These vehicles are mostly marketed at wealthy high-earners for whom the large income tax breaks are attractive.
But be aware that these tax reliefs come with all kinds of risks, rules, and regulations.
VCTs
VCTs are venture capital funds run by professional managers who make investments into startup companies.
Somewhat quixotically, however, VCTs don’t even pretend to be trying to deliver high venture-style returns for investors.
Instead they aim to return cash via steadier tax-free dividends.
You can invest up to £200,000 a year into VCTs. You must hold them for at least five years to keep your 30% income tax relief.
Fund charges are invariably expensive, and the returns mostly mediocre – especially if you back out the tax reliefs.
EIS
EIS investing is even riskier. Qualifying companies are usually very young, and many investors buy into them via crowdfunding platforms rather than professional fund managers.
The quality of these EIS opportunities is extremely variable, and information usually scanty.
And while there have been a few big crowdfunded winners, the majority do poorly and often go to zero.
If you’re a captain of finance who buys Lamborghinis before breakfast, you may already know you can put up to £2m a year into EIS investments.
Again, you can knock 30% of your EIS investment amount from your income tax bill – and there are other reliefs too should things go wrong.
You must hold EIS investments for three years to qualify for the tax relief.
Most people shouldn’t put more than fun money into EIS or even VCT schemes, in our opinion. Certainly not unless they’re very sophisticated investors or getting excellent financial advice.
Check in on your tax band and personal allowances
The rate of income tax you pay depends on your total income from all sources. This includes salary, interest, dividends, pensions, property letting, and so on.
You add up all this income to get your total income figure.
You then subtract your personal allowance from the total to see which tax bracket you fit into.
Everyone starts with the same personal allowance, regardless of age:
- For 2023/24, the personal allowance is £12,570.
Your personal allowance may be bigger if you qualify for Married Couple’s Allowance or Blind Person’s Allowance. But it’s smaller if your income is over £100,000.
For England, Wales, and Northern Ireland, the income bands after deducting allowances are currently:
| Income Tax Rate | 2023/2024 | 2024/2025 |
| Starting rate for savings: 0% | £0-£5,000 | £0- £5,000 |
| Basic rate: 20% | £0- £37,700 | £0- £37,700 |
| Higher rate: 40% | £37,701-£125,140 | £37,701-£125,140 |
| Additional 45% rate | £125,141 and above | £125,141 and above |
Source: HMRC
Note: If your non-savings taxable income is above the starting rate limit, then the starting savings rate does not apply to your savings income.
Scotland has its own income tax rates.
As we’ve seen above, there are further allowances and reliefs for income from certain sources – such as dividends and savings – that can reduce how much of that particular income is taxable.
You can also take steps such as making additional pension contributions or having a spouse hold certain assets to further reduce your taxable income or the highest rate of tax you pay.
Don’t make the UK tax deadline into a crisis
Scrambling around to exploit these allowances before the tax year ends is not only stressful – it’s also financially suboptimal.
If you had cash lying around that you might have put into an ISA earlier in the year, for example, then it could have been earning a tax-free return for months already.
But don’t blush too hard if you find yourself in this position.
Most of us are similar, which is why we wrote this article – and why the financial services industry bombards us with ISA promotions every March.
Try to automate your finances to invest smoothly and intentionally over the year.
And remember that April also brings warmer weather and longer days. Life is about much more than money and taxes!
Save and invest hard, take sensible steps to mitigate your tax bill, and enjoy life like a billionaire on whatever you’ve got leftover.
What caught my eye this week.
Exciting news! Well, exciting as measured on our patented Government Bond Excitement Scale, anyway.1
The Financial Times reports that retail investors can now buy brand new gilt issues on the primary market, thanks to an initiative between government-appointed dealer Winterflood Securities and two online retail platforms – Interactive Investor and Hargreaves Lansdown.
The FT says that:
The platforms have started accepting orders for a seven-year gilt that will be issued on Wednesday 28 February with a coupon of 4 per cent. Retail investors will be given the average price of the auction and will not have to pay any dealing fees, unlike for gilts bought through platforms in the secondary market.
Some sites are saying this is the first-time that ordinary oiks like us have been able to buy gilts direct, but I don’t think that’s correct.
You definitely used to be able to buy gilts from the Government’s Debt Management Office. And I’m sure I recall reading that you could also once get them from other places too, from NS&I to the Bank of England – and even the Post Office?
Could any readers even more ancient than me confirm (Increasingly hapless Google isn’t showing me anything about buying gilts from Ye Olden Times of more than a few years ago.)
Soft launch
I haven’t seen anything on the two platforms themselves about how direct gilt buying will work.
An article from FI Desk quotes Hargreaves Lansdown outlining a summary of the process. But I can’t find the same on the site itself.
I’m sure the FT isn’t hallucinating, Chatbot AI style, so again, if you did put an order in please tell us all how it went in the comments below.
Assuming everything works fine, then buying gilts direct will hopefully become just another standard bit of kit in our investing armoury.
There are circumstances where buying gilts new and holding them until they mature is just the ticket. Being able to do so without fees would be welcome.
Shouting “buy, buy, buy!” as you rub shoulders with the big, swinging bond dealers in the primary market will remain purely optional.
Membership update
The Monevator membership massive continues to swell. We’re now within a dozen sign-ups of our initial target!
Hopefully waverers will join us soon. I think we’ve proven we’re sticking around, nearly a year in…
On that note, a reminder members can read all of our previous Mavens and Moguls missives via the ‘tagged’ archives:
Having recurring membership revenue at our backs makes it so much easier to commit to Monevator for the long-term. That’s especially true as our churn rate (cancellations) is very low.
Thank you for that too! I know this is partly because you’re signing up to support all our work on Monevator, not just for the premium articles. It’s appreciated.
The other relief is the technology – Stripe payments, subscription handling, and premium site access – has gone extremely smoothly.
However I am still occasionally donning my customer support hat:
- Cookie monsters: If you log-in as a member but still can’t access members articles, try deleting your cookies. Also turn off ad blockers for Monevator (the site is ad-free for members anyway). And maybe try clearing your cache.
- Premium emails: The numbers tell me a very few members are not email subscribers. In most cases this happens because you previously cancelled a Monevator email subscription. If you would like to get member posts by email and you don’t, try resubscribing. Be sure to look out for the system’s opt-in confirmation email.
- Bug busting: Finally, at least one member did that but a glitch meant they were only getting the free emails, not the members-only ones. If that’s happening to you, let me know by replying to this email or via the contact form. We can get it sorted.
Again, huge thanks to the several hundred of you supporting this site as members.
It’s the only long-term sustainable future for Monevator, and I believe for most other quality niche media. Every member counts.
Besides, we don’t want my FIRE-d co-blogger The Accumulator’s Werther’s Originals budget to be entirely at the mercy of sequence of returns risk, do we?
Have a great weekend!
- This scale runs from ZIRP-ishly somnolent at the low end to Mini Budget Mayhem at the peak. [↩]
A lot of people confuse tax avoidance and tax evasion. It can be a dangerous mistake to make.
As the former British Chancellor of the Exchequer Denis Healey once said:
“The difference between tax avoidance and tax evasion is the thickness of a prison wall”.
That was why in the original published version of this article I stated:
- Tax avoidance means using whatever legal means you choose to reduce your current or future tax liabilities.
- Tax evasion means doing illegal things to avoid paying taxes. It’s the Al Capone path to financial freedom.
However the authorities have taken an increasingly tough line in recent years.
Now the phrase ‘tax avoidance’ may imply something much more questionable, as opposed to simply filling an ISA.
Tax avoidance might not be legal. Depending.
In particular, a General Anti-Abuse Rule (GAAR) was contained within the Finance Act 2013. This sought to counter ‘tax advantages arising from tax arrangements that are abusive’.
You should definitely delve into detailed guidance on GAAR if you’re contemplating doing anything out of the ordinary.
But the most relevant point for our discussion of evasion versus avoidance is that according to the tax planning resource RossMartin.co.uk:
In addition to the legislation, HMRC published guidance in April 2013 which expressly states that the GAAR is an intended departure from the previous situation where routinely cited court decisions such as the judgment of Lord Clyde, ‘every man is entitled if he can to order his affairs so that the tax attracted under the appropriate act is less than it otherwise would be’ are now rejected.
The guidance sets out the Parliamentary intention that the statutory limit on reducing tax liabilities is reached when arrangements are put in place which go ‘beyond anything which could reasonably be regarded as a reasonable course of action’.
And here’s what the Tax Justice Network says about the difference between avoidance and evasion:
Tax avoidance cannot be called ‘legal’ because a lot of what gets called ‘tax avoidance’ falls in a legal grey area. ‘Tax avoidance’ is often incorrectly assumed to refer to ‘legal’ means of underpaying tax (such as using loopholes), while ‘tax evasion’ is understood to refer to illegal means.
In the real world, however, this legal-illegal distinction often falls apart.
Whether an activity is legal or not often does not become clear until it has been challenged in court, and much of what gets called ‘avoidance’ turns out to be more like evasion.
As a result the Tax Justice Network – a lobbying group that focusses on states’ getting their due share of tax receipts – now favours the phrase ‘tax abuse’.
Tax avoidance may not be a criminal act then – depending. But if you’re hit with a big bill and penalties because what you did was deemed by a court to be the unacceptable face of paying less tax – ‘unreasonable’, in other words – then you may wonder if there’s a difference.
Please note I am NOT a tax expert and this article is not tax advice. It is simply the musings of a private investor trying to do the right thing with my own affairs. Consult a specialist and/or HMRC to know exactly where the law and you stand in respect to your taxes.
Tax avoidance out. Tax mitigation in.
For any criminals who Googled ‘tax evasion’, I’m not about to give you a masterclass in laundering cash or doctoring a passport.
I’ve never evaded taxes. I don’t condone it, and I couldn’t tell you how it’s done.
But tax avoidance mitigation – as we should now call it – is another matter.
The previous version of this piece already predicted taxes would rise in the UK over the next few decades. Higher pension costs, public debt, and the ever-rising bill for funding public services made that nailed-on.
Since then though we’ve seen public sector borrowing soar due to the pandemic, pulling forward this pressure. The overall level of taxes is now forecast to hit the highest level since the Second World War:
Our stagnant post-Brexit economy means it’s unlikely faster economic growth will bail us out anytime soon. Living standards will remain moribund, regardless of what party in power.
Meanwhile politicians increasingly talk about closing tax loopholes. In some cases – such as the carried interest enjoyed by private equity that’s now in the crosshairs of shadow chancellor Rachel Reeves – these are not improper, just disagreeable to a State with an insatiable appetite for more revenue.
Against this backdrop, it makes sense for investors to legally do what we reasonably can to reduce our tax burden – without overly compromising on other aspects of our lives, I’d suggest. (As opposed to be following the example of 1970s tax exiles…)
In doing so, we need to be extra careful today to follow the spirit as well as the letter of the law.
Examples of legitimate tax mitigation steps
There’s plenty you can do to reduce your taxes without risking fines or jail time.
ISAs and pensions
Most people can do all their investing entirely within tax shelters such as ISAs and SIPPs. They will not have to worry about further tax mitigation with respect to their investment returns.
VCTs and EIS schemes
These are riskier and (worse) more expensive ways to invest. But they can have a role for wealthy investors who’ve filled their tax shelters and can afford to chance lousy returns. Especially if they particularly enjoy backing new companies.
Think about who owns your assets
If you’re a married high-earner, it may make sense for your lower-earning and more lightly-taxed spouse to own certain assets and book the returns. Make the best of your family’s various personal allowances, but maybe take advice if you feel you’re contemplating anything unusual.
Consider salary sacrifice and other steps to lower income tax
The aim is to defer paying taxes until you’re earning less in retirement, and thus will be taxed at a lower rate.
Taxing taxes
I’m confident those tax mitigation methods are fully within the spirit of the law. That’s because when you invest in an ISA, say, you are doing exactly what the legislation intended – enjoying a tax break given as an incentive to invest for your future wealth.
But once you – or your advisors – start to get creative, you roll the dice.
When I first wrote about tax avoidance versus tax evasion in 2009, it seemed like a less contentious subject.
Of course, nobody liked a tax evader, then or now.
But over the past decade or so – perhaps spurred by the popular backlash that followed the financial crisis, and boosted by the cost of living crisis more recently – politicians, the media, and the public have cast a harsher eye on even seemingly legitimate tax avoidance, too.
This has made the distinction between evasion and avoidance blurrier than it was.
Yet this is not really a new issue. Writing in the Financial Times in the wake of a controversial craze for tax inversions by US companies, John Kay noted:
It is conventional to distinguish legal tax avoidance from illegal tax evasion. But the reality is that there is a spectrum.
The person who avoids the heavy taxation on cigarettes by giving them up wins our approval; the gangmaster who employs illegal workers off the radar screen of government authorities goes to prison when detected. But most cases lie in-between.
The UK’s HM Revenue & Customs has issued big payments claims to people who invested in highly artificial film finance schemes that did not qualify for the allowances they claimed.
Were they avoiders or evaders? The line between avoidance and evasion would be clear only if the law were clear, and it is not.
Tax law is complex and the legality of particular actions can be firmly established only if there is a decision by a court on the facts of a particular case.
A tax avoidance horror story
The fate of the film financing schemes in the courts since Kay wrote his piece has had as many plot twists as any movie. Like most people not directly involved, I lost track.
I do know though that a Supreme Court ruling in 2017 ultimately found for HMRC – potentially recouping £1 billion for the nation’s coffers, albeit at potential ruin for users of the schemes. Some of them reportedly faced tax bills several times larger than their original investment.
An HMRC spokesperson was quoted as saying:
Avoidance schemes are often highly contrived and almost invariably fall flat when trying to deliver a tax advantage never intended by Parliament.
The fact is the majority of schemes simply don’t work and can put avoidance users in a significantly worse financial position than if they had never used the scheme in the first place.
Even MPs got involved in the drama, pushing back against court rulings – or at least on the penalties imposed.
In a letter to then-chancellor Philip Hammond, Andrew Tyrie, chairman of the Treasury committee, agreed the original film industry tax breaks were arguably “too generous and ill-defined.”
But with respect to rulings against the schemes designed to exploit those breaks, Tyrie added:
An increasing number of representations have been made to me expressing concern that the outcomes are not always fair nor what anyone could have expected.
This has resulted in financial calamity for some of those involved and considerable difficulties for HMRC in bringing a large number of schemes to a close.
The affair was still rumbling through the courts as late as May 2023.
Better know better
These film financing vehicles were marketed some 20 years ago. But the saga illustrates very well that what may seem a clever wheeze one moment can levy a heavy price in time.
Most Monevator readers will have little sympathy with multi-millionaire celebrities apparently going out of their way to avoid paying more taxes to fund schools and hospitals and the rest of the laundry list.
And I am certainly not saying the film schemes were legitimate. The courts have found they were not.
However there’s a bit of going somewhere but for the grace of God about it all.
Those celebrity investors were presumably mostly advised by specialists. I suppose that many just assumed the schemes were above-board.
After all, it took a very long-running court case to prove they weren’t. How was a footballer or a pop star supposed to be able to assess that, when presented with the scheme by a professional person in a suit?
Compensating factors
Consider, by way of comparison, the Payment Protection Insurance mis-selling scandal. By the end the banks had paid out nearly £40 billion in compensation to customers deemed to have been mis-sold PPI.
For these PPI ‘victims’, caveat emptor did not apply. They eventually got their money back.
But for the would-be tax-avoiding film financiers, caveat emptor has bitten them on the bottom line.
How would we feel, if formerly commonplace practices such as pension recycling or bed and ISA-ing were suddenly deemed too aggressive?
And we were then hit with a retrospective tax bill?
Exactly.
I’m just thinking aloud. Again, I’m far from an expert on tax matters. We never give personal advice on Monevator, for both practical and regulatory reasons. But I’m always extra wary when it comes to tax.
The fact is that tax matters are often very complicated. And often dependent on your personal situation.
The letter of the law
Interestingly, in the original version of this article posted in 2009, I quoted evidence of an emerging debate about the terminology as then covered on Wikipedia.
At the time the phrase ‘tax avoidance’ was apparently in dispute in the UK, with ‘tax mitigation’ being suggested as a better term for legal tax reduction.
The Wikipedia article noted, in paragraphs since removed, that:
The United Kingdom and jurisdictions following the UK approach (such as New Zealand) have recently adopted the evasion/avoidance terminology as used in the United States: evasion is a criminal attempt to avoid paying tax owed while avoidance is an attempt to use the law to reduce taxes owed.
There is, however, a further distinction drawn between tax avoidance and tax mitigation.
Tax avoidance is a course of action designed to conflict with or defeat the evident intention of Parliament.
Tax mitigation is conduct which reduces tax liabilities without “tax avoidance” (not contrary to the intention of Parliament), for instance, by gifts to charity or investments in certain assets which qualify for tax relief. This is important for tax provisions which apply in cases of “avoidance”: they are held not to apply in cases of mitigation.
I wrote at the time that: “I suspect this is largely a courtroom debate, caused by the Revenue looking to close down schemes of dubious legality created by planners for wealthy individuals.”
And indeed, that does seem to have been the direction of travel in this area, given that later ruling in the 2013 Finance Act.
Avoid being deemed an overt avoider
So where does this leave us?
As I say I’m no legal expert nor a tax planner. I’m just an everyday bloke who enjoys investing.
So to be absolutely clear, whenever I’m talking about reducing taxes on your investments, I mean by using legal and strictly above board means. Never the dodgy stuff.
But perhaps this isn’t enough anymore? Maybe we should apply the ‘seen on the front of the local newspaper’ test to any decisions we make when reducing our taxes?
In other words, how would you feel if whatever tax mitigation decision you made was splashed on the cover of your local newspaper? For all your friends and neighbours to read?
Saving into a pension? Putting money in an ISA? Making use of capital losses by setting them against capital gains to reduce your total taxable gain?
All very safe.
What about defusing capital gains over the years by making sure you use your capital gains allowance? Or incorporating your business to reduce your income tax bill and national insurance liabilities?
Already in the current climate we can see they seem a bit less safe. I think though they are still firmly on the right side of the spirit and reality of the law, if not always the court of public opinion.
What about offshore vehicles? Or using complicated company structures or loans to avoid payroll taxes or to disguise renumeration?
Hmm. I wouldn’t and HMRC would agree.
And as barrister Patrick Cannon notes on his website:
…if HMRC investigate and find evidence of dishonesty or cheating then you may be looking at a criminal investigation for tax fraud and prosecution, leading to a prison sentence and a fine.
The sort of behaviour that this might cover includes claiming that genuine loans were made as part of the scheme when they were not genuine; or the writing of fake work diaries showing the taxpayer having spent time in the business when they were elsewhere. In my experience, these fake diaries are often produced by the scheme promoters and sent to the users for signature.
Avoid getting involved in anything dodgy or complicated like the plague. Jail sucks.
In fact, I personally draw the line at the vanilla tax mitigation I mentioned above. Beyond those straightforward measures, pay up and be happy you have the means to do so.
How to spot avoidance in action
In any event, it seems ‘avoidance’ has become a dirty word – at least when applied to contrived arrangements designed simply to reduce your tax bill.
More official advice from HMRC:
How to identify tax avoidance schemes
Here are some of the warning signs that you might be in a tax avoidance scheme or you are being offered to join one.
It sounds too good to be true
It almost certainly is. Some schemes promise to lower your tax bill for little or no real cost, and suggest you do not have to do much more than pay the scheme promoter their fees and sign some papers.
Pay in the form of loans or other untaxed payments
Some schemes designed for contractors, agency workers and other temporary workers or small and medium sized employers, involve giving workers some or all of their payment either as a loan or other payment that they’re not expected to pay back.
The payment may be diverted through a chain of companies, trusts or partnerships often based offshore and received from a third party. Sometimes the payment is received directly from an employer.
Other ways in which these untaxed payments may be described include:
- grants
- salary advances
- capital payments
- credit facilities
- annuities
- shares and bonuses
- fiduciary receipts
In all cases the schemes promise to put money in a workers pocket without having to pay tax on it. These schemes are often sold by non-compliant umbrella companies.
Huge benefits
The benefits of the scheme seem out of proportion to the money being generated or the cost of the scheme to you. The scheme promoter will claim there’s very little risk to your investment.
Round in circles or artificial arrangements
The scheme involves money going around in a circle back to where it started, or some similar artificial arrangement where transactions are entered into which have no apparent commercial purpose.
Misleading claims
The scheme is advertised using misleading claims. These may include claims suggesting a scheme is endorsed or approved by HMRC or that a scheme can increase your take home pay. For example:
- ‘HMRC approved’
- ‘Retain more of your earnings after tax’
- ‘We ensure you get the highest take home pay’
- ‘Compliant tax efficient pay’
These statements are likely to be misleading. HMRC does not approve tax avoidance schemes.
HMRC has given it a scheme reference number (SRN)
If HMRC has identified an arrangement as having the hallmarks of tax avoidance and are investigating it, you will receive an SRN by your promoter and you should include this on your tax return.
If an arrangement has an SRN, this does not mean that HMRC has ‘approved’ the scheme. HMRC does not approve any tax avoidance schemes.
If an arrangement does not have an SRN, this does not mean that the arrangement is not tax avoidance and could still be investigated.
Non-compliant umbrella companies
Many umbrella companies operate within the tax rules, however, some umbrella companies promote tax avoidance schemes. These schemes claim to be a ‘legitimate’ or a ‘tax efficient’ way of keeping more of your income by reducing tax liability.
Find out what to do if an umbrella company offers to reduce your tax liability and increase your take home pay in Spotlight 45.
Schemes HMRC has concerns about
You can find examples of tax avoidance schemes HMRC is looking at closely. Even if a scheme is not mentioned, it may still be challenged by HMRC.
You might also find HMRC’s report on the use of marketed tax avoidance schemes worth reading if you have reason to want to know more.
If in doubt, pay the tax
Well, there you have it. I know I haven’t done anything dodgy – my affairs are far too boring, and after years of defusing capital gains, nearly all my investments are these days in tax shelters or else qualify for EIS exemption.
I hope you haven’t strayed either. But the woeful fate of the film financing schemes shows how even wealthy and professionally advised investors need to be careful and remain vigilant.
Thoughts and corrections welcome in the comments, especially from experts.
Let’s be careful out there.