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Tax Man Advice

As millions suffer an ongoing financial strain, it has been revealed that as a nation we give away a staggering £12.6billion to the taxman in unnecessary tax.

Unbiased.co.uk a professional advice website in its annual Tax Action Report stated, in the tax payers year an average of £421 per person will be wasted.

We have a huge £88.6billion tax wastage over the last 10 years.

In theory this money is not entirely wasted as it does go to help fund the nations spending, however on a personnel level if it is money we are due we should make sure we apply for it.

This was the second highest recorded figure of unclaimed benefits, beaten only by last year when the figure was £13.5billion.

Unbiased findings are that the biggest amount of tax waste in 2012 is with tax credits, the amount people are losing by not claiming their child tax credits, working tax credits and pension credits correctly is £7.26billion.

The second largest area is failure to make use of tax relief on your pension contributions, there is more than £2.45billion unclaimed and third is not claiming tax relief on charitable donation more than £997million goes unclaimed.

Tax wastage what we don't take full advantage of.

£ The amount unclaimed for.

Income-related tax credits

£7.26bn

Tax relief on pensions contributions

£2.45bn

Tax relief on charity donations

£997m

Savings on Inheritance Tax

£448m

Making use of Isas

£403m

Child benefit

£401m

Avoiding tax penalties for late filing of tax returns

£307m

Savings on Capital Gains Tax

£133m

Making use of employee share schemes

£118m

Income tax and personal allowances

£83m

Total

£12.6bn

People Don't Know How To Be More Tax Efficient.

85 per cent of people say they have done nothing in the past year to reduce the amount of tax they pay, even though the tax man has been gifted a large amount.

Half of them already believe they are being as tax efficient as possible.

14 per cent don't know why they haven't done anything to be more tax efficient and a quarter doesn't know how to go about it.

The 15 per cent that have taken steps to reduce the amount they pay, of them 40per cent have changed the way they invest or save and 22 per cent have made a tax efficient purchase or investment.

Chief executive of Unbiased, Karen Barrett said: 'Looking back at the last decade and the tax wastage figures in our reports, the numbers are just as shocking now as they were then.

'This year marks our second highest tax wastage figure on record, only marginally falling from a record high last year.

'The message is clear - tax affects pretty much every one of us and with an average of £421 up for grabs for each taxpayer, we should take some time and effort to ensure that we are being as tax efficient as possible.

'Tax can be a complex area to understand and our report clearly shows that as a nation we are struggling to be as tax efficient as we could be.

'The way tax impacts on our lives will differ from situation to situation but we call on everyone to "take tax action" and to check whether there are any areas where they could improve their tax efficiency.'

What many of the general public are unaware of is that basic rate tax relief is generally applied as contributions made in to pensions; however the higher rates of tax relief need to be reclaimed via the individual's end of year tax return.

This can be an easily forgotten fact even if it was made clear to someone.

With all the bad press pensions have received lately it has had a negative effect on them all round, not only with less people investing in them but also with them being unaware of the full tax relief that can be applied for.

For a tax payers on the 40 per cent rate if they contribute £80 net into their pension this will be automatically made up to £100.

This extra £20 needs to be reclaimed through the individual tax return, however if it is not then the individual will not receive it.

If the pension holder claims correctly their income would increase by 66 per cent however if they fail to claim correctly it will only increase by 25 % still alright but not as much as it's true worth.

Due to the fact that the higher rate tax has been held back over the last few years there are more and more people getting nearer it, so this is a significant loss if you fall into this bracket and is something you should be aware about.

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