[tæks ɪˈfɪʃənsi]
Tax Efficiency is the process of legally reducing the amount of tax to pay. It can be achieved by using certain products and allowances that have tax benefits.
Tax Efficiency is the process of legally minimising the amount of tax an individual pays. This is different from tax evasion, where an individual deliberately hides information or misleads HMRC to avoid as much tax as possible.
One way a more tax-efficient outcome can be achieved is to make use of tax-efficient savings and investment products. For example, it is possible to save up to £20,000 in an ISA in the 2023/24 Tax Year. Interest on cash in an ISA is tax-free. If an ISA was not used, tax might have to be paid on some of the Savings Interest earned in a different type of savings account.
Other ways of being tax-efficient include using Pensions and other Allowances.
Tax Efficiency is particularly important for higher earners who fall into the higher tax bands.
The tax-efficient outcome is not the same for every individual. Hiring an Accountant or using a service like the one Earnr provides can help an individual become more tax-efficient, as they can use their expertise to help you through the tax process.
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