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HM Revenue and Customs (HMRC) is encouraging Brits to examine their payslips carefully for any signs of tax avoidance schemes. The Government department explains that, although it may seem difficult to spot, a straightforward check can help avoid questionable arrangements.
“Everyone can learn to spot the signs of tax avoidance,” HMRC posted to X, formerly Twitter. “Don’t get caught out.” Essentially, tax avoidance involves exploiting loopholes in the tax system’s regulations to secure an unfair advantage by paying reduced tax.
This might encompass contrived artificial dealings that serve minimal or no purpose beyond creating this benefit. Employees and contractors working through particular ‘umbrella companies’ face heightened risk, particularly when employers pledge that you can keep 80, 90 or 95% of your wages whilst remaining tax compliant.
Generally, this proves too good to be true, given that the basic rate of Income Tax stands at 20%, with National Insurance contributions also payable on earnings. Anyone found profiting from a tax avoidance scheme will be obliged to repay the legally due tax, plus interest and a potential penalty, according to the Mirror.
“Everyone is responsible under UK law for paying the correct amount of tax,” advice on the Government’s website explains. “You’re responsible even if you have appointed someone else to deal with your tax affairs and are given bad advice.”
To protect yourself against this, HMRC recommends that examining your payslips carefully is essential. This guidance applies to both people on PAYE payrolls and those completing Self Assessment forms.
Getting more cash in your bank account than what appears on your payslip serves as a major red flag, alongside receiving any untaxed payments such as loans or capital advances.
“Checking your payslips and contractual arrangements will help you confirm you are paying the right amount of Income Tax and National Insurance contributions,” HMRC adds. “Doing this will mean you avoid getting an unexpected tax bill later.”
HMRC has compiled a register of known tax avoidance schemes. Whilst it’s not exhaustive, people can examine it to determine if they are participating in any of the schemes.
“Fill in the online form to tell HMRC what you know about the person or business,” advice on the Government’s website continues. “It helps if you share your name, location and contact details. HMRC can then contact you if they need more information.
“You do not have to give your personal details. Any information you do give will be kept private and confidential.”
