Taxes we hate the most

Chancellor Gordon Brown will need to conjure up something very special on Budget Day if he wants to impress the British electorate. In an online survey of 1,851 Fool.co.uk readers, a staggering 92% of respondents felt they were not getting value for money for their taxes.

Of particular interest to British taxpayers will be changes, if any, to Inheritance Tax, which, together with Council Tax and Stamp Duty, is one of the three most disliked taxes. Joint top of the hate list is Council Tax and Inheritance Tax, followed by Stamp Duty. Interestingly, the vast majority of people are not put off by either Income Tax or VAT.

Almost all eyes will be focused on the Chancellor as he steps forward to deliver his eleventh Budget on 21 March. Nine out of 10 people said the Budget was either quite important or very important to them. Perhaps many will be looking for possible tax loopholes, because three out of five people admitted thinking that avoiding taxes is fair game.

A significant group will also be hoping for a simplification of the tax system. More than 96% of the people bemoaned Britain’s complicated taxes and said the system needs to be more straightforward. The findings are not entirely surprising given that one out of three people who complete a Self Assessment tax return requires professional help at some time.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “Most people accept that taxes are inevitable in a civilised society. But people want to see tangible benefits in return for the money they pay in the form of taxes.

“Sadly, nine out of 10 people are disappointed that they are not getting value for money. It is a terrible indictment of the Government’s wasteful use of tax revenues.

“But, not content with squandering tax receipts when homeowners are alive, the Government continues to prey on homeowners after they die through Inheritance Tax. The tax is nothing short of graveyard robbery, and discourages families to save and own. Even worse, it thwarts every family’s right to pass on its wealth to future generations.”

Fool.co.uk’s top three tips for avoiding needless taxes:

1. Get a personal tax-free shelter

You can invest up to £7,000 a year in an Individual Savings Account to protect any future profits from tax. So, if you haven't used up your contribution allowance for this financial year, don't delay.

2. Use your spouse’s allowance

If you're paying tax on savings interest or share dividends, you can reduce your tax bill by transferring this capital to a lower-earning spouse. For example, if you are on a higher tax band than your spouse, you could put some (or all) of your savings and shares in his/her name, reducing your overall tax bill as a couple.

3. Offset your capital losses against capital gains

Your losses are offset against your gains when your Capital Gains Tax (CGT) bill is calculated. So, if your gain exceeds the CGT allowance in one tax year, it may be a good idea to take a loss on a poor-performing share in order to reduce your overall tax bill.