Finance Choices
Britons paying £7.6bn too much tax
UK taxpayers will hand the Inland Revenue £7.6 billion more than they need to this year, new figures show.
This is because more than four adults in five are simply not paying attention to where they could save money, IFA Promotion reveals today.
And this laziness is increasing, with Britons set to needlessly surrender £1.8 billion more of their money to the taxman this year than last.
"Whether through apathy or confusion, the failure to claim tax credits is just one way we?re gifting unnecessary and vast sums of money to the taxman each year," said David Elms, IFA Promotion chief executive.
"And people can take even simpler steps to stamp out tax waste, such as non-taxpayers filling in a simple form, married couples making sure they use up both tax-free personal allowances, or people simply submitting their self-assessment forms on time.
"Over the past few years, the onus for managing tax affairs has shifted increasingly to the individual, but our awareness and action is not keeping pace, and so the mountain of tax waste keeps growing."
IFA Promotion's top tips for cutting tax
-Claim your tax credits - £2.9 billion of ?free money? is up for grabs from HM Revenue & Customs and the Department of Work and Pensions, in the form of pension credits, child tax credits and working family tax credits.
-Use up your annual ISA allowance - £170 million in tax could be avoided by tax-free 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.
-Sort out your self-assessment - £487 million waste could be wiped out by all forms arriving present and correct by the January 31st 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.
-Maximise your personal tax allowances - £548 million goes begging each year, £319 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £229 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.
-Plan your inheritance - an extra £1.3 billion could go to chosen heirs by planning properly to avoid inheritance tax liabilities. Inheritance tax 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.
-Top up your pension pot - £656 million could be spared by optimising contributions to personal or company pension schemes, or making additional voluntary contributions.
-Take advantage of employee share plans - £207 million is up for grabs for the estimated 600,000 staff currently in profit related pay schemes.
-Use your capital gains allowance efficiently - £389 million could be saved by transferring assets between spouses to make the most of both of your capital gains tax allowances.
-£808 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.
-Using up the tax free savings potential of child trust funds - £21 million in tax could be saved in their first year of existence.
This is because more than four adults in five are simply not paying attention to where they could save money, IFA Promotion reveals today.
And this laziness is increasing, with Britons set to needlessly surrender £1.8 billion more of their money to the taxman this year than last.
"Whether through apathy or confusion, the failure to claim tax credits is just one way we?re gifting unnecessary and vast sums of money to the taxman each year," said David Elms, IFA Promotion chief executive.
"And people can take even simpler steps to stamp out tax waste, such as non-taxpayers filling in a simple form, married couples making sure they use up both tax-free personal allowances, or people simply submitting their self-assessment forms on time.
"Over the past few years, the onus for managing tax affairs has shifted increasingly to the individual, but our awareness and action is not keeping pace, and so the mountain of tax waste keeps growing."
IFA Promotion's top tips for cutting tax
-Claim your tax credits - £2.9 billion of ?free money? is up for grabs from HM Revenue & Customs and the Department of Work and Pensions, in the form of pension credits, child tax credits and working family tax credits.
-Use up your annual ISA allowance - £170 million in tax could be avoided by tax-free 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.
-Sort out your self-assessment - £487 million waste could be wiped out by all forms arriving present and correct by the January 31st 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.
-Maximise your personal tax allowances - £548 million goes begging each year, £319 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £229 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.
-Plan your inheritance - an extra £1.3 billion could go to chosen heirs by planning properly to avoid inheritance tax liabilities. Inheritance tax 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.
-Top up your pension pot - £656 million could be spared by optimising contributions to personal or company pension schemes, or making additional voluntary contributions.
-Take advantage of employee share plans - £207 million is up for grabs for the estimated 600,000 staff currently in profit related pay schemes.
-Use your capital gains allowance efficiently - £389 million could be saved by transferring assets between spouses to make the most of both of your capital gains tax allowances.
-£808 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.
-Using up the tax free savings potential of child trust funds - £21 million in tax could be saved in their first year of existence.
posted by Barbara Gordon at 1:27 PM
Britons paying £7.6bn too much tax
5 Comments:
This financial year I have had 3 jobs.
Can anybody tell me how much tax I should have paid? As I am back to full time studying I won't work again this tax year. (enough savings to allow me to concentrate fully on study) I tried the on line assessment but the site is down and the phone is always engaged. Details below.
My first job earned me £7620.96, tax on that £1091.42
I was in that job from the start of the financial year through until 23/09/06. I had a £500 pound tax benefit due to having a company van. Tax code on my P45 is 417L.
My second job was only for 2 weeks from 17/10/05 to 28/10/05. The tax code was 489L. I earned £494.70 and tax paid £38.30
No tax benefit. This was an agency job.
I then got the job I was temping in, working from 31/10/05 to 13/01/06. Tax code 417L. I earned £3346.60 and paid tax of £527.54
(The reason I left was to return to Uni until summer to finish my degree. My first job offered voluntary redundancy so it made sense to take it and get another job until I returned to Uni)
That gives me total earnings of £11462.26 and tax total of £1657.26. Given my personal allowance starts at £4895 minus £500 benefit deduction that means I should be taxed on £7067.26. I think this means I have overpaid on tax by about £230. Am I working this out right? Do I have to wait until the end of the tax year to request a rebate (if there is one) or do I contact them now?
Thanks for any help.
I make your overpayment £345
£2020 at 10% - £202
£5046 at 22% - £1110
Total £1312
However I'm not sure I understand the bit about the company van benefit.
Ring up the HMRC - though as I've found out it can take a long time to get through!
Thanks for the reply.
The company van amount I mentioned was a deduction from the tax free amount I can earn. Personal allowance £4895 minus £500 so I was able to earn £4395 before I would be taxed.
I'll keep trying the phone number. If the rebate is as much as you think that would be great. Always good getting unexpected money.
Hi
My friend's father has a massive property that they are trying to avoid inheritance tax on and my friend was told to open a limited company in his name and have the property transfered thereby avoiding inheritance tax. is this correct because i have a feeling they would still be paying some sort of taxes on this?
Capital gains tax, and possibly IHT as well if dad passes away within 7 years. Sorry, there's something else - could be held to have deprived himself of capital if he needs to go into residential care later on, and wants the Local Authority to pay for it.
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