15th February 2026
Michelle Eames explains the strategies to avoid taxes legally and keeping assets with borrowing rather than selling to get money.
BUT some caveats you need to think about.
This approach is sometimes promoted in wealth planning or property/financial markets. The idea is:
Instead of selling assets and paying capital gains or income tax, you borrow money against your wealth (stocks, property, pensions, or other investments).
You use the loan to fund your lifestyle instead of selling assets.
Because loans are not income, they do not trigger income tax.
Theoretically, when you pass away, your estate may repay the loan from the remaining assets, deferring or avoiding capital gains tax.
At first glance, it seems like a clever workaround: "don't sell, don’t pay tax, borrow instead."
Why It’s Risky
Interest Costs Add Up
Loans accrue interest. Even low‑interest borrowing eventually becomes a large financial burden, and compounding can erode your wealth faster than expected.
Asset Risk
If the value of the assets you borrowed against falls (e.g., property market declines, stock market drops), your loan-to-value ratio can exceed safe limits, potentially forcing you to sell assets anyway at a loss.
Regulatory Scrutiny
Tax authorities (HMRC in the UK, IRS in the US, etc.) are aware of these strategies. Using debt purely to avoid taxes can be classified as tax avoidance or even tax evasion if structured improperly, which carries penalties, interest, and legal risk.
Estate Planning Complications
While borrowing can defer capital gains taxes, your estate still inherits the obligation to repay the loan. If the estate lacks liquidity, heirs could be forced to sell assets quickly — potentially triggering the very taxes you were trying to avoid.
Cash Flow Risk
Borrowing requires repaying interest regularly, sometimes for decades. If your income or liquidity falls unexpectedly, debt can spiral into financial stress.
Alternatives
Instead of using high‑risk debt to defer taxes, there are safer ways to manage tax liability:
Use tax‑efficient accounts: ISAs, SIPPs, or other retirement accounts in the UK.
Stagger asset sales over years: to make use of annual capital gains exemptions.
Gift assets strategically: if estate planning is your goal.
Leverage legitimate reliefs and allowances: e.g., principal private residence relief, business asset disposal relief.
These methods reduce taxes legally without taking on potentially dangerous debt.
Bottom Line
Borrowing to avoid paying tax can seem attractive on paper, but it carries serious financial, legal, and estate risks. It’s a high-risk strategy usually suitable only for sophisticated investors with professional legal and financial advice, and even then it must be carefully structured.
For most people, it’s safer and more sustainable to plan taxes with allowances, timing, and exemptions, rather than relying on indefinite borrowing.