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Britons Wasting GBP8 Billion In Unecessary Taxes

by Jason Gorringe,, London

05 March 2007

More than eight in ten of UK adults will together waste GBP7.9 billion in unnecessary tax in 2007, a massive GBP300 million increase on last year, according to a new report.

According to’s annual TaxAction report, this is the highest ever level since the organisation, which promotes independent financial advice, began its campaign fifteen years ago.

The report finds that personal tax levels have soared from a collective GBP40.5 billion to GBP149 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 threw away an average of GBP160 each on tax in 2007, a rise of 68% in five years from GBP95 per person in 2002.

The report also reveals that inheritance tax (IHT) continues to be an area where Britons are needlessly squandering money. More than GBP1.5 billion is likely to be paid in death taxes in 2007, a 16% increase on the amount lost to IHT in 2006. Of the total amount of IHT collected by the Government in 2006/07, 43% was provided by cash that could have remained in taxpayers’ pockets, the study found.

David Elms, Chief Executive of commented:

“Since we launched TaxAction fifteen years ago, we have seen a shift in responsibility in personal tax away from HMRC towards the individual. Although controlling tax is more firmly in our hands we are still throwing away GBP7.9 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 GBP1.5 billion down the drain. An independent financial adviser can make avoiding IHT and wider tax issues, a much simpler process.” recommends ten basic steps to claw back some of this tax waste:

  • Plan 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.
  • By sheltering investments in ISAs, or moving savings from an ordinary deposit or savings account to an ISA, GBP382 million in tax could be avoided. Friendly Society savings account or products from National Savings & Investments are also tax-efficient savings options.
  • If eligible, claim tax credits - GBP2.3 billion of ‘free money’ is up for grabs from HM Revenue & Customs and the Department for Work and Pensions, in the form of Pension Credits, Child Tax Credits and Working Family Tax credits.
  • Ensure that self assessment tax returns are filed correctly and on time. says that GBP463 million in tax waste could be avoided if taxpayers filed their returns before the January 31 deadline. Forms filed after this date attract an automatic GBP100 penalty, and could be subject to further fines and interest payments.
  • Maximise personal tax allowances. Unbiased says that GBP546 is wasted each year through non-taxpayers failing to claim tax back on banks and building society savings accounts, and through taxpayers not transferring savings accounts to non-taxpaying spouses, if appropriate, so that the tax liability on the savings is lower, or none.
  • Ensure pension pots are topped up. GBP739 million could be spared by optimising contributions to personal or company pension schemes, or making Additional Voluntary Contributions.
  • Take advantage of employee share plans. GBP171 million in tax could be saved for the estimated 600,000 staff currently in Profit Related Pay schemes.
  • Use capital gains tax allowance efficiently, perhaps by transferring assets between spouses to make the most of both of your CGT allowances - GBP510 million could be saved in this way says Unbiased.
  • Charitable giving. GBP1 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.
  • Avoid waste by using up the tax free saving potential of a child trust fund. GBP125 in tax could be saved in their first year of existence says Unbiased.

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."

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