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The importance of tax planning and avoiding the pitfalls

Although no one is keen on paying taxes, they are inevitable in the world we live in. In the past, it has generally been assumed that tax avoidance is legal and tax evasion against the law, but the HMRC has recently clarified the definitions.

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Some well publicised tax avoidance systems, popular with a few celebrities, have hit trouble, meaning tax has had to be repaid and in some cases penalties imposed.

The revenue now views schemes that gain a tax advantage never intended by Parliament, as not within the spirit of the law, resulting in problems for individuals and their advisors using them.

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Grey area

This happens when the scheme falls into a grey area between tax planning and evasion. The former aims to reduce tax liabilities and is perfectly legal. The revenue has been quick to point out that most advisors should be happy to use ISAs and inheritance planning freely with no risk of them ever falling into an area which the revenue considers illegal. Individuals, should then, feel able to seek advice on how best they can plan their affairs in terms of current tax liabilities and those arising in the future. The best way to do this is by finding that advice. Whether you are looking for an independent financial advisor Swindon, Sheffield or Solihull, you will find reputable firms online at sites such as https://chilvester.co.uk/.

Tax-free savings

Once you have your advisor in place you can begin the process of minimising the tax you are likely to pay and get your financial affairs in order to provide you with peace of mind. There are many forms of relief available which will mean you are not straying into the grey areas the Revenue have identified. These involve tax-free savings such as ISAs, and sheltering assets which may be steadily appreciating, such as a property or savings, from inheritance tax.

As in all matters to do with your finances, apply the general rule of thumb that if you do not fully understand the scheme or it sounds too good to be true, avoid it at all costs. No reputable independent financial advisor will propose such a scheme as they now can be subject to severe penalties for initiating such a plan.

Remember too that the Government is encouraging tax-free savings.

 

Rony Bhuyan

Rony Bhuyan is a writer, online marketer and part-time graphics designer with a background in Finance. A regular contributor to Speaky Magazine and Tech Magazine. His real passion, however, lies in helping his clients.

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