UK’s tax waste mountain grows to £9.3 billion

UK adults will waste almost £9.3 billion in unnecessary tax in 2008, according to the latest TaxAction report from Unbiased.co.uk. The report, which is now in its 16th year, shows that the amount wasted in tax payments will increase by almost £1.4 billion compared to 2007 to the highest ever since Unbiased.co.uk’s campaign began. More alarmingly, 82% of Brits admit to doing nothing to reduce their overall tax burden.

The TaxAction report from Unbiased.co.uk, the Find an Independent Financial Adviser Search shows that unnecessary Inheritance Tax (IHT) payments is set to rise by over £360 million in 2008, to a predicted total waste of over £1.9 billion. This is despite IHT being named the most resented tax by one in five UK adults (20%).

When asked which one message Brits would send to the Chancellor of the Exchequer, almost a third (31%) would opt for changes to the current income tax system. A maybe surprising message as Unbiased.co.uk’s TaxAction report shows that £474 million will be wasted in 2008 on personal tax allowances.

David Elms, Chief Executive of Unbiased.co.uk comments, “Our TaxAction report is now in its 16th year but the message remains the same – UK taxpayers are wasting record sums in unnecessary tax payments. And our report shows that 2008 will be no different. We estimate that each UK tax payer will waste an average of over £290 in tax payments this year.

“We have seen a lot of talk about stealth taxes and IHT but our figures prove that it hasn’t changed the way people deal with this tax and too much money is still being wasted – and practically gifted to the taxman. A somewhat surprising result, given the large amount of people who are dissatisfied with the current tax system.

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

IF YOU HAVE ASSETS OVER £300,000: Plan your inheritance - an extra £1.9 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 - £263 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 - £3.7 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 - £479 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 - £474 million goes begging each year, £330 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £144 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 TOWARDS A PENSION: Top up your pension pot - £726 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 - £184 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 - £264 million could be saved in this way.

IF YOU GIVE TO CHARITY: £936 million 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 - £242 million in tax could be saved in their first yearof existence.

David Elms concluded, “With more and more people feeling the pinch in the current financial climate it is surprising just how much we are willing to throw away in wasted tax payments. While tax can be a confusing topic, help is at hand. 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 unbiased.co.uk/taketaxaction. The site contains tips on how to save tax, an online tax wastage calculator, and a guide to saving tax. You can also find details of local IFAs on the site.