Income tax avoidance

Argonauts

This year 2025

Albermarle

ClashCityRocker1 said:

I know this will be anathema to nearly everybody here, but if you have maximised all your ways to avoid tax on a large estate, rather than give everything taxable to charity why not, 

er,

...just pay the tax?

Not a political point, let's not get into that, but once you've leveraged all the breaks parliament have allowed -(almost a sacred duty I suppose)  after that let's help run the country (or pay debt interest, or whatever else the Treasury does with it!)

There seems be two schools of thought on this forum in this regard.

The first and the largest one, has educated themselves and/or are educating themselves about tax, especially regarding pensions ( in accumulation and withdrawal) and how to reduce how much to pay ( or to gain from reliefs).
However avoiding paying tax is not their main priority, and is only one part of their financial strategy, or retirement plan. If they pay some tax in following these plans through, then C'est la vie . Mostly they can easily afford to anyway and they are fully aware that the Govt does need income !

The second school of thought ( mainly newbies but not all) is that avoiding tax/giving money to the Govt ( or avoiding paying for your own care later in life )  is their top priority, and will go to great lengths to do that, even if in some cases it means cutting off their noses to spite their faces, in the more extreme cases.

No doubt some inbetweenies as well . 

DRS1

Gifts from income ?

Can I treat from banks / Sipp/Isas count to income ?

There are threads on here and the Cutting Tax board about gifts from EXCESS income which is what you are talking about I think.

My initial reaction was that your taxable income is so low that I could not see how you could have any excess.  If you are spending capital on things which you would normally spend income on (eg holidays) then I think you may have to restructure things to make use of this gifts from excess income thing.  There is an IHT form (403) which shows the sort of records you ought to keep - perhaps have a look at it and see if it is something you want to explore (or avoid like the plague)

I have nothing useful to say about banks or ISAs but on SIPPs if you are taking your payments from the SIPP as UFPLS including some tax free cash in each payment then I think you can count the whole UFPLS payment as income and not just the 75% which is subject to income tax.

Aylesbury_Duck

Once you have a lifestyle you're happy with and there's no risk of running out of money to fund it or good quality care should you need it, and you've made what you think is adequate provision for anyone you care about, the sensible thing is to find a charitable cause you genuinely care about and gift the excess to them now, or in your will.  

Anything else is surely just greed or spite, isn't it?

Albermarle

Aylesbury_Duck said:

Once you have a lifestyle you're happy with and there's no risk of running out of money to fund it or good quality care should you need it, and you've made what you think is adequate provision for anyone you care about, the sensible thing is to find a charitable cause you genuinely care about and gift the excess to them now, or in your will.  

Anything else is surely just greed or spite, isn't it?

Gifting to charity in your will, has a double advantage.
Apart from the gift being taken out of your estate, if it is big enough it reduces your IHT tax rate on the rest of the estate ( assuming it is big enough) from 40% to 36%.
It can mean the real cost of any charity donation in your will is not much more than half its actual cost. Very MSE !

artyboy

Albermarle said:

Aylesbury_Duck said:

Once you have a lifestyle you're happy with and there's no risk of running out of money to fund it or good quality care should you need it, and you've made what you think is adequate provision for anyone you care about, the sensible thing is to find a charitable cause you genuinely care about and gift the excess to them now, or in your will.  

Anything else is surely just greed or spite, isn't it?

Gifting to charity in your will, has a double advantage.
Apart from the gift being taken out of your estate, if it is big enough it reduces your IHT tax rate on the rest of the estate ( assuming it is big enough) from 40% to 36%.
It can mean the real cost of any charity donation in your will is not much more than half its actual cost. Very MSE !

And if your estate is big enough, it can also be a safety valve to prevent loss of your RNRB (which tapers down to zero once your estate exceeds £2m)

Albermarle

artyboy said:

Albermarle said:

Aylesbury_Duck said:

Once you have a lifestyle you're happy with and there's no risk of running out of money to fund it or good quality care should you need it, and you've made what you think is adequate provision for anyone you care about, the sensible thing is to find a charitable cause you genuinely care about and gift the excess to them now, or in your will.  

Anything else is surely just greed or spite, isn't it?

Gifting to charity in your will, has a double advantage.
Apart from the gift being taken out of your estate, if it is big enough it reduces your IHT tax rate on the rest of the estate ( assuming it is big enough) from 40% to 36%.
It can mean the real cost of any charity donation in your will is not much more than half its actual cost. Very MSE !

And if your estate is big enough, it can also be a safety valve to prevent loss of your RNRB (which tapers down to zero once your estate exceeds £2m)

Yes good point.
I also found out recently if the marital assets are over £2 Million and concentrated on one person and they die first, then no RNRB to pass on and on second death none available again ( assuming the estate is the same size).However if assets were more split, on first death the RNRB would be preserved and could be still used on second death, although the 'second death' RNRB would still be lost.

Argonauts

Many thanks for answers

Moonwolf

hugheskevi said:

Silvertabby said:

OP isn't the first on these boards who have said that their ambition is to pay as little tax as possible in retirement.

Our combined tax payments are £600 per month, but we'd much rather be in this position than have to subsist on little more than just the State pension.

Although I take every possible means to reduce my personal tax burden (fulfilling my sacred duty!), and also that of my wife, I don't mind paying income tax on pension - it is extremely low after all the tax breaks and taking care to allocate funds to optimally take advantage of Personal Allowance and basic rate tax bands.

On our combined taxable pension income of £86,668 (the current accrued amount, albeit not payable for years yet) we would pay £12,306 income tax, or an average rate of 14% based on 2025/26 rates and thresholds. There is no employer or employer NI to pay, there will previously have been 25% tax free sums taken from some of our pensions, and a lot of the pension built up benefitted from no employer or employee NI. Quite frankly, the rewards from pensions are preposterously generous.

If a single person was earning that amount, then ignoring pension contributions they would pay £38,090 in income tax and employer/employee National Insurance, an average rate of 44%. They would also be far more likely to have to pay a mortgage, rent, and Student Loan repayments, car loans, etc, from that income.

All pre-budget rumours should be taken with a pinch of salt but one I have seen doing the rounds is that the budget will take 2p off the NI rate and add it to the basic rate tax rate. This would possibly meet the requirement of not increasing take for “ordinary working people” and actually seems more credible to me than for example, removing the TFLS.

This would obviously mean higher tax for pensioners and might sting particularly for those with only a little on top of state pension. If I was implementing this I would give those over SPA an additional personal allowance of £500, that protects the lowest paid pensioners (who might struggle to add income now) and delays the day when big numbers on only state pension have tax to pay.

I would still pay more for the time being  as I have retired long before SPA and when I do get my state pension I will still have enough to be paying extra, but I would support this as it seems fair to me.

Linton

Moonwolf said:

hugheskevi said:

Silvertabby said:

OP isn't the first on these boards who have said that their ambition is to pay as little tax as possible in retirement.

Our combined tax payments are £600 per month, but we'd much rather be in this position than have to subsist on little more than just the State pension.

Although I take every possible means to reduce my personal tax burden (fulfilling my sacred duty!), and also that of my wife, I don't mind paying income tax on pension - it is extremely low after all the tax breaks and taking care to allocate funds to optimally take advantage of Personal Allowance and basic rate tax bands.

On our combined taxable pension income of £86,668 (the current accrued amount, albeit not payable for years yet) we would pay £12,306 income tax, or an average rate of 14% based on 2025/26 rates and thresholds. There is no employer or employer NI to pay, there will previously have been 25% tax free sums taken from some of our pensions, and a lot of the pension built up benefitted from no employer or employee NI. Quite frankly, the rewards from pensions are preposterously generous.

If a single person was earning that amount, then ignoring pension contributions they would pay £38,090 in income tax and employer/employee National Insurance, an average rate of 44%. They would also be far more likely to have to pay a mortgage, rent, and Student Loan repayments, car loans, etc, from that income.

All pre-budget rumours should be taken with a pinch of salt but one I have seen doing the rounds is that the budget will take 2p off the NI rate and add it to the basic rate tax rate. This would possibly meet the requirement of not increasing take for “ordinary working people” and actually seems more credible to me than for example, removing the TFLS.

This would obviously mean higher tax for pensioners and might sting particularly for those with only a little on top of state pension. If I was implementing this I would give those over SPA an additional personal allowance of £500, that protects the lowest paid pensioners (who might struggle to add income now) and delays the day when big numbers on only state pension have tax to pay.

I would still pay more for the time being  as I have retired long before SPA and when I do get my state pension I will still have enough to be paying extra, but I would support this as it seems fair to me.

The 2p moved from NI to income tax is not a pre-budget rumour but rather a specific proposal by the Resolution Foundation, a think tank.

It probably wont happen as the Labour Party said they would not increase Income Tax.  Pity, it is rather a good idea in my (pensioner) view.