These two phrases are commonly mixed up by those who don’t really understand the tax system however while one is perfectly legal the other definitely isn’t. Tax avoidance involves using the present tax exemptions to pay less tax at the end of the financial year and this is a perfectly legal thing to do. Tax evasion however is simply not paying your taxes at all and this is classed as a criminal offense. The government has now bought in severe penalties for tax evaders and you could end up with a prison sentence as well as a huge bill for additional court costs.

Avoiding Tax

As already mentioned this is perfectly legal and finding the loopholes and exemptions in the tax system is the job of accountants, independent financial advisors and tax planners. There are numerous ways to reduce your annual tax bill – especially for those who are self employed – and while hiring a good accountant or IFA can be expensive, they can often find ways to reduce your tax bill by an equivalent sum and probably more.

People who fill in their own tax return forms often miss out vital bits of information, either because they don’t know or because they can’t be bothered to find the figures and this is especially true when it comes to expenses. Taking the time to fill in the forms properly with all the relevant figures can save you hundreds or even thousands of pounds on your tax bill each year.

Evading Tax

Evading paying your taxes on the other hand is very illegal and is now seen as a serious criminal offence. Not only can people incur large penalties for not filing their self assessment tax return on time, they can then also be prosecuted for not paying the bill. The same applies to people who are employed but are paid cash-in-hand and if this is the case then it is the responsibility of the worker to pay their taxes when due.

Today the HMRC take very few excuses for non-payment of taxes and so using the common pleas of forgetfulness, lost paperwork and bad accountants won’t work. Filing a self employed tax return even a day late incurs an automatic charge of £100 in addition to your final tax bill. Trying to evade your taxes is both silly and dangerous as you can end up with a criminal record and even a prison sentence in severe cases. With this in mind, it is much more advisable to pay your taxes on time and in full and just do what you can to reduce the amount owed as much as is legally possible.