Offsetting Tax Liabilities

Dellboy99

For reasons of bad choice on my part some years back, I'm now faced with possible unexpected Tax Bills from HMRC, and worrying about how I could settle them without risking my home.

I've just turned 55, but still have a sizeable mortgage resulting from my divorce some years back. Casting around for options, I've realised that my private pension fund value (which I'd almost forgotten about) is big enough to cover my potential liability, but obviously I can't access all the funds directly without a further hefty tax bill.

My current wife found mention on the HMRC website that they could take pension funds as assets against tax debts, but there was no detail on how that might work.

I am still working and have a good chance of continuing to earn good money for some years, so I'm not overly concerned about sacrificing my existing pension funds if that's what it takes to have a clean slate (with the resultant big improvement in my peace of mind).

Does anyone have direct knowledge or experience of using pension funds to offset tax debts, or how it works?

Alternatively, if anyone has any bright ideas on how to manouever assets (legally) to help myself, I'm all ears. I did hear when the pension reforms were discussed that folk might be able to tie up funds in property as an investment. I didn't hear any more on that, but I'd happily move my pension into my home if it allowed me to extract existing equity.

Thanks all

kidmugsy

Not residential property, no. Commercial property is OK, which might work if you run your own business.

Do HMRC allow people to pay off debt over several years (subject to interest being payable)? Failing which, how about increasing your mortgage to release some funds?

Dellboy99

At present HMRC are taking a heavy handed approach (or so I hear) where they want debts settled within a year. Not sure if there's much I can do on the mortgage front, given my age, but you never know I guess....

kidmugsy

Would using a 0% credit card help enough to be useful?

Does your present wife have any spare capital? She could always buy part of your share of the house from you.

bigadaj

It's difficult to comment without actually seeing figures quoted. If your home is at risk then there's presumably a significant sum involved, one option might be to crystallise the pension but not draw anything from it. This would allow you to draw a 25% tax free lump sum, if that is enough for the tax, or to make a big dent in it then that might be an option.

Taking a pension can limit the amount that you can the contribute going forward, my understanding is that if you take the tax free cash and don't draw the pension then that doesn't affect future contributions, if you do then further contributions are limited to £10k per year rather than the normal £40k.