The Art of Tax Unplanning

We spend much of our time helping people to pay the minimum amount of tax, while always staying within the law. One of the problems is that the line between legitimate tax planning and tax evasion is broad and indistinct. Sometimes, in the absence of clear guidance it is a question of how brave do you feel.

Leaving that aside, there are definitely occasions when saving tax will cost you money. Paying the tax is always, without exception, the cheapest option. How much it will cost you depends upon what you buy in order to save the tax. Ask yourself this question. Would I have spent that money if I was not getting any tax relief?

Nobody likes paying tax. It is commonly viewed as the penalty you pay for being successful and like all penalties and fines, it can demotivate and ultimately discourage you from taking those actions that would make you more successful and make more profits.

Let me introduce you to the Art of Tax Unplanning.

I want to explore some basics of Tax Unplanning and help you pay more tax and potentially be financially healthier. Read on and I will explain.

1.  Don’t buy equipment

The capital allowances on equipment are still good. You can get tax relief of 100% when you buy most types of equipment (except cars). That means that you get the value of the equipment deducted from your taxable profits. In many cases that means that you spend £100 and you may save as little as £19 in tax. But, after you get the tax relief, you are still £81 out of pocket.

Therefore never buy equipment that you do not need just to save tax. Buy equipment that you need and the tax relief is a bonus. Perhaps even buy it a few months early to get the tax relief in an earlier year. But never buy something you don’t need, just to save tax. You will be out of pocket and you have probably bought a depreciating asset, losing money with every passing day.

2.  Don’t restrict your business to avoid hitting the VAT threshold

There are two ways to avoid registering for vat. Either keep your turnover below the vat threshold or don’t declare the excess turnover, which we would definitely not recommend. I was once asked to advise in the purchase of a B&B with a turnover (according to the seller) of £110000, but not vat registered. The prospective buyer wanted me to tell them how not to declare the excess over the vat threshold. I declined and they went to another accountant.

I have come across people who will close 1 or 2 days every week to avoid hitting a turnover of £85000 and having to register for VAT. But that means that you are placing a ceiling on your turnover and your profits. Ultimately you can find yourself out of pocket, not only from the profits you have not made but also because of the effect it could have on the value of your business.

If your turnover hits £85000, you only need to increase it to a maximum of £102000 to put your profits back to where they were. Then any further growth puts profits back into the business and cash in your pocket.

3.  Pensions – can increase your taxes!

Putting money into pensions can be a useful and effective way of saving for your retirement and you get tax relief now at your marginal rate of tax. Sounds good.

However, putting more than the business can afford into a pension, just to save tax, could leave you short of working capital and in extreme cases jeopardise the business itself.

This is a difficult call because as well as getting tax relief, you also have an enduring investment that should retain its value (unlike a piece of equipment). But that is all it is, an investment. It should not be viewed as a panacea to reduce or eliminate your tax liability.

Also, keep this in mind. If your trading company makes pension contributions to your scheme, it will only get tax relief at 19%. When you come to take out the pension you will get a tax free lump sum but what rate of tax will you pay on the regular payments that you receive after that time. If you choose to take your pension while still working, and making money,  or if you have a significant amounts in pensions or other investments , you could end up paying higher rates if tax on the income. Should you have considered ISAS – no tax relief on investment but no tax on withdrawal.

Speak to your IFA, and if you don’t have one, we can point you in the right direction.

4.  Grow your business so you can pay more tax.

Ultimately you must decide what type and scale of business you want. Some people want to work on their own, but as many will be selling their time, that limits their earning capacity. Some have had bad experiences employing staff. Join the club, it goes with the territory. But, if you want to build something significant, you have to expand. This may be because you are chasing profits but in most cases, people just like to see something grow and be able to take pride in what they have achieved, but it is never easy. If you want it easy, get a job.

There are many considerations to building a successful business. You need something to sell that has value to someone else. You need to make them aware you have that product or service (marketing) and you must persuade them to pay you (sales). You must have a means of delivering that product or service and finally, the numbers must also be right, so you can deliver the product or service and have enough profit to make the whole process (and hassles) worthwhile to you.

Should you buy another business? That can accelerate your growth but it is a whole new ball game. Having said that, I would highly recommend it as a way to grow your business.

Once you have grown your business, you should be making much bigger profits, and that means more tax. But you have more money in your bank account so get over it.

We can help you structure the business to keep the tax to a minimum but if you want to make good profits, you will pay more and more tax as your profits grow. So, that is good.

5.  Stop! The ultimate tax saving strategy.

If you cease trading, you will pay less tax, but you and those depending upon you will be financially worse off. Death, as far as we are aware, is also a way of avoiding paying tax. Both of these will cut your tax bills but at what cost.

There are people who depend upon you and so you have a duty to live up to that responsibility. That means earning money and most people only have two choices, employment or self-employment.

If you choose self-employment, you then decide if you will employ staff or not.

Ceasing without a financial plan in place is madness and irresponsible. But I have seen it done, so it is one option that will always be on the table. But, you will not need our services as you will not be earning enough to be paying tax.


What are you financial goals. If you need to earn enough to support your dependents or you have other needs for cash, perhaps tax saving is not your highest priority.

Do you know where you are going? I assume you know where you are as you read this. What is your destination? Do you have a plan? Remember that if you don’t know where you are going, all roads lead there.

Everyone should have a BHAG – a big hairy audacious goal. Do you? That goal should be separate from any thoughts of tax. Set the goal first and then lets discuss how you minimise the tax on route to that goal. Tax saving is not a valid goal in itself, it is always secondary.

Give me a call

If I have made you think a little more about the merits of Tax Unplanning and you want to explore the concepts further, just give me a call and we can set up a meeting, either face to face or online. We can also help with you BHAG and the road map to reaching your destination while minimising the tax you pay along the road.



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