UK’s tax waste mountain grows to £7.9 billion

More than eight in ten (82%) UK adults will waste £7.9 billion in unnecessary tax in 2007, according to Unbiased.co.uk’s fifteenth annual TaxAction report. This is a massive £300 million increase on last year and the highest ever since Unbiased.co.uk’s campaign began.

Personal tax levels have also soared from a collective £40.5 billion to £149 billion over the past 20 years for all UK adults. Although 27 million (62%) people resent this rising tax bill, 74% admit to not taking steps to reduce their tax. This means UK adults are currently throwing away an average of £160 each on tax in 2007, a rise of 68% in five years from £95 per person in 2002.

The TaxAction report from Unbiased.co.uk, the website promoting the benefits of independent financial advice, also reveals that IHT continues to be an area where we are needlessly squandering money. More than £1.5 billion is likely to be paid in “death taxes” in 2007, a 16% increase on the amount “lost” to IHT in 2006. In fact, of the total amount of IHT collected by the Government in 2006/07, 43% was provided by cash that could have remained in the tax payers’ pocket. This shows how we are still not taking the right steps to protect our legacy from the tax man.

David Elms, Chief Executive of Unbiased.co.uk comments, “Since we launched TaxAction fifteen years ago, we have seen a shift in responsibility in personal tax away from HMRC towards the individual. Because controlling tax is more firmly in our hands we are still throwing away £7.9 billion. This is enough in tax each year to make a millionaire a day for the next 21 years.

“Despite plenty of attention being given to IHT in the past year, people are still not taking the necessary steps to protect themselves and their relatives from paying huge sums in IHT and effectively throwing £1.5 billion down the drain. An independent financial adviser can make avoiding IHT and wider tax issues, a much simpler process.”

Tax doesn’t have to be taxing – Here are 10 basic ways to claw back some of the waste:

IF YOU HAVE ASSETS OVER £285,000: Plan your inheritance - an extra £1.5 billion could go to chosen heirs by planning properly to avoid IHT liabilities. IHT is often lost through not writing life assurance policies in trust, not thinking about inheritance tax allowances and, worst of all, by not making a will at all.

IF YOU SAVE: Use up your annual ISA allowance - £382 million in tax could be avoided by sheltering investments in ISAs, or moving savings from an ordinary deposit or savings account to an ISA. Also consider a Friendly Society savings account or products from National Savings & Investments as tax-efficient savings options.


IF YOU ARE ELIGIBLE: Claim your tax credits - £2.3 billion of ‘free money’ is up for grabs from HMRC and the DWP, in the form of Pension Credits, Child Tax Credits and Working Family Tax credits.

IF YOU FILL IN A TAX RETURN: Sort out your self-assessment - £463 million waste could be wiped out by all forms arriving present and correct by the 31st January deadline. Self-assessment forms received after the deadline incur penalties of £100; further penalties and errors make up the balance of tax wasted in this way.

ALL TAXPAYERS: Maximise your personal tax allowances - £546 million goes begging each year, £322 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £224 million by taxpayers not transferring savings accounts to non-taxpaying spouses, if appropriate, so that the tax liability on the savings is lower, or none.

IF YOU SAVE: Top up your pension pot - £739 million could be spared by optimising contributions to personal or company pension schemes, or making Additional Voluntary Contributions.

IF YOUR EMPLOYER OFFERS AN EMPLOYEE SHARE PLAN: Take advantage of it - £171 million is up for grabs for the estimated 600,000 staff currently in Profit Related Pay schemes.

IF YOU HAVE CAPITAL GAINS: Use your allowance efficiently, perhaps by transferring assets between spouses to make the most of both of your CGT allowances - £510 million could be saved in this way.

IF YOU GIVE TO CHARITY: £1 billion more could go to good causes by using tax-efficient means of charitable giving, i.e. using a deed of covenant, Gift Aid or payroll giving.

IF YOUR CHILD OR GRANDCHILD IS ELIGIBLE FOR A CHILD TRUST FUND: Avoid waste by using up the tax free saving potential - £125 million in tax could be saved in their first year of existence.

David Elms concluded, “It’s hard to say whether we are disengaged or just confused as to why people across the UK are still throwing away billions in tax every year. Simple steps such as filling out a self assessment form correctly, making a will and taking full advantage of your tax credits, could help the UK pocket this wasted cash.

“In Franklin’s words, nothing is certain in life except death and taxes…But why pay more than you need to? People need to realise there are simple things they can do themselves to save on tax bills and that for more complicated areas, seeking professional help is easy. Through www.unbiased.co.uk/taketaxaction a local IFA can help you discover where you can make significant savings on your tax burden.”

As a first step to stamping out this waste, visit Unbiased.co.uk’s dedicated website at www.unbiased.co.uk/taketaxaction. The site contains tips on how to save tax, an online tax wastage calculator, and a guide to saving tax.