Tax Avoidance vs Tax Evasion

HMRC has secured billions of pounds in additional tax revenue over recent years by cracking down on tax avoidance, evasion and non-compliance.

Tax Avoidance

You can avoid paying tax by better tax planning which is legal. For example, you can pay into a pension scheme to avoid paying tax or sell the business assets in two tax years to utilise the annual tax exemption for each year.

Tax Evasion

Tax evasion is illegal and considered fraud which involves breaking the law, for example, deliberately hiding the trading revenue or using tax avoidance schemes.

A tax avoidance scheme is an artificial arrangement to avoid paying the tax. For example, getting taxable income as loans or other payments you’re not expected to pay back.

The penalties for tax evasion can be financial, criminal and, in some instances, both. You could be “named and shamed” by HMRC if you’ve avoided over £25,000 in tax.