Review of savings habits & trouble associated with it

In light of the recent crackdown on tax evasion it would be good to check your savings habits.

13:45 19 May 2013

The recent news about evading taxes or even avoiding taxes may have some people taking a look at their savings habits and whether or not those habits could get them into trouble in the future.

 

Avoiding taxes in the UK is not illegal, but evasion is. If you’re caught, it could mean fines up to 200per cent of what your taxes would have been. If you want to make sure your savings habits won’t get you in trouble, here are a few tips:

 

• Consultation—consults with a knowledgeable tax expert before you start enacting your savings plan. Find out what is, and isn’t allowed. If there’s a grey area, make sure you avoid it and stay within clearly legal parameters.

 

• Documentation—if you participate in tax avoidance by using legal means such as giving monetary gifts keep receipts or some sort of documentation of what has transpired. If it is a significant amount, you may even want to have the transaction witnessed.

 

• Simplicity—if you don’t want to worry about consulting tax experts, you can just keep it simple by using only regular savings accounts, Cash ISAs, Stocks and Shares ISAs or other traditional forms of investments.

 

• Localization—in general, if you keep your money local (within your country) you should be fine if you’re concerned primarily with savings habits. Some people try to hide their savings in accounts that are out of the country.

 

If you stick to traditional savings habits with ISAs and savings accounts, or stock market and other investments you should be absolutely fine.

 

Those are all legitimate ways to save money but can give you a tax break in some cases on the interest that is earned. It’s best to speak with a tax professional if you have more specific questions or want to know about a certain savings scenario.