‘Check before you dip’
Workers accessing private pension savings or using complex pay arrangements have been warned “check before you dip”.
The alert has been issued by HM Revenue and Customs (HMRC) and it comes amid a crackdown on tax avoidance schemes.
In a statement it said: “Check before you dip into your private pension pot – it could be tax avoidance and could cost you a lot more than you think.”
The alert was directed at individuals accessing private pension funds, where certain arrangements claim to release money prematurely or in a tax-efficient manner.
HMRC’s stance is simple: if something appears too good to be true, it likely is – and may lead to a substantially larger bill down the line.
The agency is also targeting arrangements that promise higher take-home pay but could leave individuals facing significant financial consequences.
Officials have warned that those involved in such schemes may be required to repay the full amount of unpaid tax, alongside interest charges and penalties.
HMRC said concerns are growing over contractors and agency workers being drawn into complicated payment structures, often operated through ‘umbrella companies’, which can obscure how income is taxed.
In a statement the taxman said: “Understanding how you’re being paid is the best way to make sure you don’t get caught up in tax avoidance. This applies to people in PAYE as well as Self Assessment.
“Checking your payslips and contractual arrangements will help you confirm you are paying the right amount of Income Tax and National Insurance contributions. Doing this will mean you avoid getting an unexpected tax bill later.”
It also explained that many avoidance schemes rely on “artificial transactions that serve no real purpose” beyond reducing tax liabilities on paper.
Individuals have been warned that they remain legally responsible for paying all tax owed, regardless of whether they relied on advice from scheme promoters.
Workers may face a “double hit”, losing money paid to scheme operators before being pursued for the full tax bill.
Anyone who believes they may be involved in a questionable scheme is being urged by HMRC to contact it as soon as possible.
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