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News: Britons give away highest-ever tax mountain

Britons are set to waste nearly £8 billion in unnecessary tax this year, a report shows.

27 million UK adults resent the rising tax burden, but 74% admit to doing nothing to reduce their tax payments, according to the annual TaxAction report from Unbiased.co.uk.

And some 82% will waste £7.9 billion by not claiming, saving or filling in forms effectively. That’s a whopping £300 million more than last year and the highest for the 15 years the Tax Action report has been going.

This means British adults are currently throwing away an average of £160 each on tax in 2007, a rise of 68% in five years from £95 per person in 2002.

The report from the website promoting the benefits of independent financial advice also reveals that IHT continues to be an area where we are needlessly squandering money. More than £1.5 billion is likely to be paid in death taxes in 2007, a 16% increase on the amount ‘lost’ to IHT in 2006. 

In fact, of the total amount of IHT collected by the Government in 2006/07, 43% was provided by cash that could have remained in the tax payers’ pocket. This shows how we are still not taking the right steps to protect our legacy from the tax man, said the firm.

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

  • If you have assets over £285,000: Plan your inheritance - an extra £1.5 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 - £382 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 - £2.3 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 - £463 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 - £546 million goes begging each year, £322 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £224 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: Top up your pension pot - £739 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 - £171 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 - £510 million could be saved in this way.
  • If you give to charity: £1 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.
  • If your child or grandchild is eligible for a child trust fund: Avoid waste by using up the tax free saving potential - £125 million in tax could be saved in their first year of existence.

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