No-one likes paying tax, but it is an inevitable overhead of making a profit, and keeping it to pay normal living expenses. Anyone who says otherwise is manipulating the truth, either when dealing with you or with the tax office. Yes, it is true that income tax is a voluntary tax. Although government anti-avoidance legislation is making this less true, you can still fairly easily legally avoid paying any tax by applying different tax allowances. Unfortunately, you will end up with little or no income available to pay your mortgage or rent, gas and electricity, food and clothes, and the other necessities of life.
Normally, the comment that we hear is some variation of “My mate lives in a detached house and goes abroad on holiday for at least 6 weeks a year but he has said that he never pays any tax. Why have I got a tax liability?” However, we have recently heard a different, and sadder, version.
A few weeks ago we saw a couple who have had over a year of sleepless nights. For a number of years they have had a second property, acquired before they became a couple, from which they have sometimes received rental income. The property was bought with a mortgage, and was later used as collateral to raise the deposit on their current home. They have never declared any income to the tax office.
Their sleepless nights were caused by listening to the “man in the pub” rather than coming to us earlier. They thought that they might end up in prison. They had also been told that they could be facing penalties in excess of £10,000 each. To meet these supposed liabilities they had not only sold the second property, incurring a potential Capital Gains Tax liability, but also cashed in a pension policy, incurring a 40% tax liability on the proceeds.
On the information that we received at the first meeting we estimated a maximum liability for tax, interest and penalties of about £13,000. A more realistic estimate is about £3,000 – £4,000!!
The moral of the story? We may be more expensive than the man in the pub. However, we do offer a free of charge initial consultation, and you should at least avail yourself of that opportunity before taking any irreversible action! If you know anyone with a similar problem then please give them our contact details – we would be pleased to speak to them.