Brits lost a staggering £9.3 billion through tax wastage last year, new research has found.
Yet despite the potential savings on offer, four in five people (82%) have not taken any steps to reduce their overall tax payments.
Lack of IHT provision represents the single largest tax wastage, totalling £1.9 billion last year.
According to research from Unbiased.co.uk, the main cause of "death tax" wastage is the inclusion in personal estates of the proceeds of life assurance policies, which if written in trust, would not be subject to inheritance tax.
Ten tips to avoid tax wasteMake use of your ISA allowance: The best way to protect your
savings and
investments from the tax man is to make use of your £7,200 ISA allowance. Unbiased estimates that the nation could save a total of £263 million by doing so.
Tax free savings for you children: The
Child Trust Fund is a government initiative designed to get parents saving by offering all children born after 1 September 2002 a tax-free £250 voucher that can be invested on their behalf, followed by a second £250 voucher at the age of seven.
You can choose from either a cash or
stakeholder account, which can be topped up to a maximum of £1,200 a year, with all gains tax free.
Maximise your personal tax allowance: Some £474 million goes begging each year - £330 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further £144 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.
Claim your tax credits: If all those eligible were to go through the (admittedly complex) process of claiming their tax credits, they would benefit to the tune of £3.7 billion.
Sort out your self-assessment: According to Unbiased, £479 million waste could be wiped out by all forms arriving present a nd 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.
Reduce capital gains tax: Use your allowance efficiently, perhaps by transferring assets between spouses to make the most of both of your CGT allowances - £264 million could be saved in this way.
Top up your pension pot: Optimise contributions to company or
personal pension schemes, or make Additional Voluntary Contributions and £726 million could be spared.
Mask use of an employee share plan: Around £184 million is up for grabs for the estimated 600,000 staff currently in Profit Related Pay schemes.
For those who give to charity: Almost £1 billion more could go to good causes by using tax-efficient means of charitable giving, For example, you could use a deed of covenant, Gift Aid or payroll giving.
Avoid IHT: As we mentioned at the start, IHT is the single largest area for tax wastage. For those who have assets worth over £312,000, better planning to avoid IHT liabilities would see chosen heirs receive an extra £1.9 billion.
“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,” says Unbiased.
