148 days worked this year for the taxman – 28 May 2014 marks Tax Freedom Day!

27 May 2014

•    Britons become ‘tax free’ on Wednesday 28 May 2014 – average worker will spend 148 days of their salary on tax payments
•    UK taxpayers are still set to waste as much as £4.7 billion in unnecessary tax payments this year
•    Three quarters (75%) of people admit they haven’t done anything to reduce their tax waste in the past 12 months
•    Make 28 May 2014 ‘TaxAction Day’ – unbiased.co.uk urges Brits to tackle their tax waste
On 28 May, Britons can take pleasure in knowing this year they will have worked enough days to stop paying everything they earn to the taxman and can start earning for themselves!
Falling two days earlier than last year, Wednesday 28 May marks ‘Tax Freedom Day’1, a notional date in the year when UK taxpayers will have earned enough income to pay off their annual tax burden to the state. The date is calculated annually by the Adam Smith Institute by adding up all the taxes paid by people in the UK and dividing by their incomes, this year taking the average UK worker 148 days of earning.
But research from unbiased.co.uk, the ‘find an adviser’ search, shows Britons are still leaving themselves open to unnecessary payments to the taxman when it comes to their savings and investments. Its annual TaxAction research shows UK taxpayers are set to gift £4.7 billion2 this year, over £100 million more compared with 20133, by not making the most of tax reliefs available to them or not using tax-efficient savings products. This translates into an average of £161 per person4.
Looking specifically at four key areas of tax – individual savings accounts (ISAs), pensions tax relief, inheritance tax (IHT) and capital gains tax (CGT) – the research shows the biggest area of tax waste is pensions, with £2.9 billion set to be wasted by UK taxpayers not using the pension tax reliefs available to them. A further £1.1 billion is set to be wasted in unused ISA allowances, £530 million will be wasted in IHT and £154 million in CGT.
Further to this, unbiased.co.uk’s research5 also shows three-quarters (75%) of people admit they have done nothing to reduce their tax waste in the past 12 months. Only 38% say they would be confident in sorting their tax planning without the help of a professional financial adviser6.
unbiased.co.uk comments: “Tax Freedom Day may be a notional date in the calendar but our research shows, when it comes to tax, people could be doing much more for their own financial benefit if they looked closely at their savings and investments. Our TaxAction figures show people are still not making the most of tax efficient savings and investment vehicles, despite tax reliefs, allowances and better rates being available to them.
“It can be easy to bury your head in the sand when it comes to tax and for many it’s a question of confidence. Our research shows only four in ten people think they’d be confident in tackling their tax burden without the help of professional advice. For those looking to make 28 May their ‘TaxAction Day’, a whole of market professional adviser is best placed to advise on responsible tax planning. They will advise you through the process, providing you with peace of mind and confidence that you are being as tax efficient as possible, ultimately reducing your tax burden. For a free and confidential search for a financial adviser or accountant, go to www.unbiased.co.uk.”
UK taxpayers’ tax wastage 2014 – the key statistics:

£2.9 billion in pension tax relief waste

  • UK employees who have a pension on average put away £3,260 annually, including £652 a year in tax relief from the government
  • 4.4 million UK adults are currently in employment not saving into a pension and not making use of their pension tax allowance from the government, but would potentially consider contributing towards a pension, resulting in £2.9 billion in tax relief set to remain unused this year
  • Anyone paying towards a pension receives tax relief on their pension savings at 20% and up to 45% according to the rate at which they pay tax. If you are a higher-rate taxpayer the onus is on you to claim back the additional tax relief owed to you  

£1.1 billion in ISAs

  • 49 million UK bank account holders are set to waste a combined total of more than £1.1 billion by not moving their money into tax-efficient individual savings accounts (ISAs)
  • Of that wastage, £984 million can be attributed to failure to use cash ISAs and a further £160 million in stocks and shares investments not held in ISAs

£530 million in inheritance tax waste

  • £530 million wasted in inheritance tax (IHT) by individuals not placing life protection policies ‘under trust’
  • Not placing it under trust could reduce a £100,000 life insurance payout by as much as £40,000 if an individual’s total estate is worth more than £325,000
  • Only 27% of people would be confident in tackling IHT planning without the help of a professional adviser

£154 million in capital gains tax

  • £154 million in unnecessary capital gains tax (CGT) payments this tax year, based on 35% of the amount paid in CGT which could be saved if parts of the profits were put in an ISA
  • 2014 unbiased.co.uk TaxAction research shows one of the main areas of CGT waste occurs from people not using ISAs to shelter investments from any tax liabilities 
  • Each UK taxpayer has an annual CGT free allowance, which for the current tax year stands at £10,900. Any gain above the allowance is charged at 18% for lower and 28% for higher-rate tax payers

Notes to editors:
1.    Tax Freedom Day is a floating date calculated every year (from 1 January) by the Adam Smith Institute: see www.adamsmith.org for details.
2.    unbiased.co.uk commissioned Opinium Research to produce its TaxAction 2014 report. All figures are based on calculations done on unrounded values to guarantee accuracy; text paragraphs display rounded figures.
3.    2013 total tax waste is £4.6 million, TaxAction research 2013: http://www.unbiased.co.uk/tax-action-2013-infographic
4.    Based on the average number of taxpayers, according to HMRC: http://www.hmrc.gov.uk/statistics/taxpayers/table1-4.pdf. This calculation is based on the overall amount of tax wasted across different groups of taxpayers, and while not every single taxpayer is affected in the same way, the average amount of £161 has been provided to show how much could be wasted across the UK population.
5.    The unbiased.co.uk web poll asked: Have you done anything to reduce your tax liabilities in the last 12 months? 75% said no. (base:163 consumers visiting unbiased.co.uk between 28 January – 13 February)
6.    unbiased.co.uk commissioned Opinium Research to produce its GetAdvised report. It was carried out 8 – 11 October 2013 among 2,000 nationally representative UK adults aged 18+
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