In 2023–2024, HMRC will raise £105 billion through special investigations into the wealthy How can you safeguard yourself?

Annually, the tax collector's revenue from looking into wealthy people more than doubled

How do you ensure that you are not caught?

In the 2023 - 2024 tax year, HMRC collected over 10.5 billion in tax from special investigations into the wealthy, more than doubling the 713 million it collected the year before.

According to the law firm Pinsent Masons, the tax was collected by HMRC's Wealthy and Mid-Sized Business Compliance Directorate, a team tasked with identifying possible tax evasion.

The funds were collected from some of the wealthiest people in Britain, who were defined by HMRC as those with assets exceeding two million pounds or incomes exceeding two hundred thousand pounds.

In 2023 - 2024, HMRC collected 5.2 billion pounds in taxes from the wealthy, up from 4 billion in the previous fiscal year.

The government has instructed the tax collector to proactively track down unpaid tax bills.

In her Spring Statement, Chancellor Rachel Reeves allocated an additional 100 million to HMRC to hire 500 additional compliance officers in the hopes of generating an additional 1 billion in tax revenue by the end of the 2029 - 2029 fiscal year.

According to Pinsent Masons, this initiative may lead to more frequent special investigations into high-income taxpayers as HMRC works to reduce the 1 point 9 billion tax gapthe discrepancy between total tax liabilities and actual tax paid.

The chancellor has set "very hard" targets for additional tax collection, according to Ian Robotham, director of tax dispute and investigations at Pinsent Masons. He says it is "hard to see" how HMRC will meet these targets without a "sharp" increase in tax investigations into the wealthy.

"Wealthy taxpayers who are aware that they have tax matters to resolve should immediately seek professional advice," he continues.

"When taxpayers take the initiative to contact them to inform them of and help them resolve inaccuracies, penalties related to those inaccuracies can be reduced.

Pinset Masons adds that HMRC has been investing more in big data and AI tools to help officers collect taxes, which makes it even more crucial to file your taxes accurately.

How to ensure that you're lowering your tax obligation.

It's a good idea to make sure you are managing your money wisely because the government may be conducting more frequent special investigations into the wealthy as it attempts to combat unpaid taxes.

"The tax system begins to bite in multiple places" after you surpass the 200,000 income threshold, according to Ian Futcher, financial planner at Quilter.

"Additional income and capital taxes can make things worse without careful planning," Futcher says, adding that the personal allowance is tapering off and that the effective income tax rate for those making between £100,000 and £125,140 is already above 60%.

It may be worthwhile for high earners to take action to ensure that their overall tax obligation is kept to a minimum.

Pension contributions, according to Futcher, are one of the "key" ways to accomplish this.

Futcher states that "pensions remain a powerful tool" despite the fact that some high earners' annual pension allowance has been reduced. However, he also points out that "pension wealth will soon become liable to inheritance tax, so this needs to be thought about."

Because the Residence Nil Rate Band (currently 175,000) tapers away when estates exceed this amount, it means that more wealth is subject to IHT, which may be a particular concern for wealthy people with assets of £2 million or more.

Futcher explains that "trust planning, surplus income gifting, and the use of onshore bonds within trusts can help to reduce the taxable value of the estate without sacrificing control or liquidity" to ensure that you are not caught off guard.

He goes on to say: "Using lifetime gifting techniques to distribute asset ownership among family members, especially for assets that are anticipated to increase in value, can also be very successful over time.

Futcher advises high earners to be particularly mindful of their investment strategy.

"For any investments outside of an ISA, capital gains tax can be reduced by structuring portfolios to utilize ISA allowances annually in full and offsetting gains with capital losses.

Family investment firms and limited partnerships, according to Futcher, can "offer flexibility and intergenerational planning advantages too," but they "need to be carefully planned and expert advice is key."

For instance, using a child's JISA allowance or a spouse's ISA allowance may work well.

In the end, according to Futcher, the tax system is full of peculiarities and thresholds that "penalise the unwary" and "the wealthier you are, the more likely you are to stray into inefficient territory without a detailed plan."