Reform Deputy Leader says all British tax payers should do their best to find ways to pay the minimum amount of tax possible

I’m just quoting the government’s own words Norah, their official view differs from yours.

ISA is a savings account- in which the annual interest is tax free- introduced to encourage savings. Tax has already been paid on earned income or inherited income which is deposited.

It is not therefore a tax avoidance scheme to avoid paying tax on earned income which is what Tice was aiming to achieve.

LemonJam

ISA is a savings account- in which the annual interest is tax free- introduced to encourage savings. Tax has already been paid on earned income or inherited income which is deposited.

It is not therefore a tax avoidance scheme to avoid paying tax on earned income which is what Tice was aiming to achieve.

Tax has already been paid on earned income or inherited income which is deposited.

This is an irrelevance. Even if your income is taxed before you receive it (e.g. under PAYE) It is taxed again when you spend it, either directly by way of VAT or fees paid to the government such as for passports, driving licence renewals etc, or indirectly when the company you buy goods or services from are taxed on their profits. No-one gets an exemption from further taxation just because their income has already been subject to income tax.

Dividends arising from 'investment are usually taxed as unearned income, though at a lower rate than earned income, which is why people who have enough money to invest in many cases pay a lower percentage in tax than do those dependent on earned income alone. A loophole which it is time that governments closed by making tax rates on both types of income the same. Also, unearned income isn't subject to National Insurance Contributions, which is really just another tax when it comes down to it. This also contributes to the lower percentage of taxation on those who live on 'unearned income'.

Tax free ISAs are a legal method of tax avoidance.

To be clear though, the government does not classify ISAs as tax avoidance, as the quote I gave above indicates.

LemonJam

ISA is a savings account- in which the annual interest is tax free- introduced to encourage savings. Tax has already been paid on earned income or inherited income which is deposited.

It is not therefore a tax avoidance scheme to avoid paying tax on earned income which is what Tice was aiming to achieve.

Tax is payable on most other cash savings accounts if the interest on them would exceed your Personal Allowance.

The interest on ISAs, Premium Bonds and some other Government savings vehicles is tax-free.

Putting money into an ISA is NOT tax avoidance.

Tax Policy Associates

Normal tax planning

Parliament intends for people to do that so you get a good result e.g. an ISA. You pay less tax. Your conscience is clear.

Successful tax avoidance

You thought you had a clever way to do something with you’re assets that meant tax wasn’t due. The Court says you were right. You complied with the law - although many people will think you acted wrongly and that the law is wrong. You pay less tax.

These days, there is almost no chance a tax avoidance scheme will fall into this category.

Failed tax avoidance

You think you found a clever legal way not to pay tax. The Courts say you were wrong. Turns out you didn’t comply with the law and have to pay the tax in full plus interest but not penalties as you weren’t careless.

Tice. We shall see.

Non compliant

Tax was legally due but you didn’t know and weren’t dishonest e.g you thought off-shore accounts were not taxed. You didn’t comply with the law and have to pay the tax plus interest and civil penalties if you were careless, which you probably were.

This is probably where the Rayner case about Stamp Duty Land Tax will fall. She was careless not to take proper advice. She accepted the word of people who said they thought the transaction would probably fall into the standard band for SDLT but that she should seek expert advice. It is the trust for her child or children which holds another property which complicates the matter while they are under 18. See Dan Neidle on this:

taxpolicy.org.uk/2025/09/05/angela-rayner-hmrc-penalties/

Tax evasion You knew tax was legally due but you didn’t pay e.g hiding money offshore and not declaring it. Criminal offence. You have to pay the tax, interest, civil penalties and potentially do jail time.

Read Dan Neidle’s story of the case against Nadhim Zahawi and how he tried to cover it up.

taxpolicy.org.uk/2023/01/19/zahawi_story/

And the Guardian reporting:

www.theguardian.com/uk-news/2023/jan/20/nadhim-zahawi-agreed-on-penalty-to-settle-tax-bill-worth-millions

It is believed that the tax Zahawi owed was £3.7 million but he settled with HRMC for just over £5 million with interest and a 30% penalty added.

HMRC.

* If a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due.

* If the error is deliberate, the penalty will be between 20% and 70% of the extra tax due.

* If the error is is deliberate and concealed the penalty will be between 30% and 100% of the extra tax due.

You can see that at 30% in his case could have fallen within any of the three although he claims that the error was considered careless not deliberate.

Farage’s house in Essex, bought for £885,000 in his girlfriend's name allegedly to avoid the higher rate of SDLT is another matter. The question is where did the money come from? When asked if he had provided the money, he denied it. He said he hadn’t lent her any money and didn’t give her the money, that her French family is wealthy and she could afford it herself.

x.com/DanNeidle/status/1965002728230293639

Again, I suspect HMRC will take a close look at the paper trail.

Putting money into an ISA is NOT tax avoidance.

Semantics!

Putting money into an ISA is NOT tax avoidance.
🤔

HMRC What tax avoidance is

Tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended.

www.gov.uk/guidance/tax-avoidance-an-introduction

Nobody is bending the rules when they put money into an ISA.

ISAs were introduced by Gordon Brown in his 1987 Budget to replace TESSAs (Tax-Exempt Special Savings Accounts) and PEPs (Personal Equity Plans).

He announced: Half the adult population of our country hardly saves at all. So, in order to encourage personal savings, the Government will, as promised, introduce from 1999 individual savings accounts, extending the principle of TESSAs and PEPs and continuing to offer favourable tax reliefs for saving.

api.parliament.uk/historic-hansard/commons/1997/jul/02/budget-statement

How is tax being avoided if it's legal to save or invest in this way? It's no more avoidance than if one utilises the annual Personal Savings Allowance to cover some or all of the interest earned on a taxable savings account, the CGT annual allowance on capital disposals, the PPR exemption when selling a principle private residence or indeed the annual Personal Allowance of £12,570. They are all legislated tax allowances.

Allira

^I would remind you, of course, that taxation doesn't fund spending^

So offering more to Rachel won't make much difference then?
Phew! I can relax.

Ms Reeves will just carry on extending the Personal Tax Allowance freeze. When is it due to end? 2031, 2032.........any advances?

MiazieD 20.43: "This is an irrelevance. Even if your income is taxed before you receive it (e.g. under PAYE) It is taxed again when you spend it, either directly by way of VAT or fees paid to the government such as for passports, driving licence renewals etc, or indirectly when the company you buy goods or services from are taxed on their profits. No-one gets an exemption from further taxation just because their income has already been subject to income tax"

It is not an irrelevance as an ISA is not 'spending', ie buying goods MaizieD- it is "saving"- very different.

However, even if we use your VAT 'spending' analogy there are similar tax exempt examples, i.e. the government has made certain things VAT exempt, in a similar way they have made tax free relief on ISA interest and investment returns. Examples include insurance, burials/cremations, services provided by healthcare professionals like nurses, doctors, opticians and provision of medical supplies etc etc. It would be ludicrous to suggest anyone paying for those tax exempt examples is committing tax avoidance.

Graphite, 21.11 and 23.37- agree with everything you say and explanation why "saving" in an ISA is not tax avoidance.

Apologise for typo in your name- MaizieD

Casdon

To be clear though, the government does not classify ISAs as tax avoidance, as the quote I gave above indicates.

Graphite ^How is tax being avoided if it's legal to save or invest in this way? It's no more avoidance than if one utilises the annual Personal Savings Allowance to cover some or all of the interest earned on a taxable savings account, the CGT annual allowance on capital disposals, the PPR exemption when selling a principle private residence or indeed the annual Personal Allowance of £12,570. They are all legislated tax allowances.

Thank you for explaining, it seemed semantics.

With legislated tax allowances in mind, we'll continue giving gifts into ISA accounts. I believe IHT may be what prompted this bit of the thread -- ISA accounts, gifts from income to our children before IHT.