UK Adults Waste £5.7 Billion In Tax

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§  25 million (60%) adults resent rising tax burdens, yet three quarters (76%) admit to doing nothing to reduce the amount they pay

§  UK adults waste £133 each a year in tax

§  Visit www.taketaxaction.co.uk to see how you could save tax

Nine out of ten (89%) UK adults will waste almost £5.7billion this year in unnecessary tax – a shocking figure considering 60% of us say we resent rising tax bills, and over three quarters (76%) of us admit to having taken no steps over the past year to reduce the amount of tax we pay.  These are the top findings of the thirteenth annual TaxAction^* investigation, commissioned by IFA Promotion, on behalf of the UK’s independent financial advisers.

IFA Promotion’s research** reveals that the greatest proportion of wasted tax is lost through inheritance.  Whilst 30% of UK adults resent paying inheritance tax, a staggering £1.6billion a year is wasted through poor inheritance planning.

David Elms, Chief Executive of IFA Promotion, says, “Failure to plan our inheritance properly is one of many ways we’re frittering away vast sums of money each year.  The onus is increasingly falling on us to manage our own tax affairs, but millions have been slow to pick up on this responsibility.  This year alone, the average taxpayer will squander £133 in unused tax breaks, Revenue fines and unclaimed credits and reliefs, with higher rate taxpayers wasting much more still.”

For example, millions of taxpayers will miss out on £127million in ISA tax breaks this year, despite a strengthening stockmarket.  In addition, the introduction of Child Trust Funds will result in an initial £10million of waste this year, as parents and others squander the chance to save tax-efficiently for their offspring.  Yet this figure is just the tip of the iceberg, and we can expect to see it rise significantly over the coming years as increasing numbers of children become eligible for Child Trust Funds.  

“We’re urging people to take some simple measures to minimise this mountain of waste.  You can often make a big difference with very little effort, such as claiming credits and reliefs that are rightfully yours.  Non-taxpayers can also avoid wasting money by filling in a simple form available from banks and building societies to stop paying tax on savings.  Discussing your financial planning situation with a local independent financial adviser should also help cut your waste considerably,” continues Elms.

Together we waste enough money to create a new millionaire every day for the next fifteen years.  And reducing the amount of tax you pay can cost nothing and take very little effort.  Here are nine simple ways to set you in the right direction:

·               IF YOU SAVE: Use up your annual ISA allowance - £127 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 additional tax-efficient savings options.

·               IF YOU FILL IN A TAX RETURN: Sort out your self-assessment - £418 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 - £431 million goes begging each year, £318 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £113 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 HAVE ASSETS OVER £263,000: Plan your inheritance - an extra £1,586 million could go to chosen heirs by planning properly to avoid inheritance tax liabilities. This is 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: Top up your pension pot - £613 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 - £285 million is up for grabs for the 865,000 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 the lower rate taxpayer - £333 million could be saved in this way.

·               IF YOU GIVE TO CHARITY: £691 million more could go to good causes by using tax-efficient means of charitable giving, ie using a deed of covenant, Gift Aid or payroll giving.

·               IF YOUR CHILD IS ELIGIBLE FOR A CHILD TAX FUND: Avoid waste by using up the tax free saving potential - £10 million could be saved in their first year of existence.

Elms adds, “The UK public’s generosity was clearly demonstrated by the Boxing Day tsunami appeal, which makes it all the more disappointing that £691million more could have reached good causes this year if more people had taken advantage of tax relief on Gift Aid, payroll giving and deeds of covenant.”

IFA Promotion’s TaxAction 2005 research also showed that 82% of women took no action whatsoever to reduce the amount of tax they paid last year compared to 70% of men.

Elms concluded, “No one likes paying tax, yet too few people do anything about it, which is why we are urging people to take tax action now.  With a bit of care, and the advice of an IFA, people could save themselves an average £133 a year.”

As a first step to stamping out this waste, people can visit IFA Promotion’s dedicated website at www.taketaxaction.co.uk.  The site contains tips on how to save tax, an online tax wastage calculator, and a guide to saving tax, packed full of useful information.  People can also find details of local IFAs on the site or by calling 0800 085 3250.

-ends-

For further information please contact:

David Elms                                    Ali Richardson / Richard Winder 

Chief Executive                  Lansons Communications

IFA Promotion                    Tel: 020 7294 3679 / alexandrar@lansons.com

Tel: 020 7833 3131                       or    020 7294 3641 / richardw@lansons.com     

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