Over paid tax

UK taxpayers will overpay an average of GBP421 (USD661) in tax this year, with 85% failing to act on reducing their tax bill, according to new figures.

The statistics, revealed in Unbiased.co.uk’s annual Tax Action Report, reveal that the UK will ‘gift’ GBP12.6bn in unnecessary tax to HM Revenue and Customs in 2012. The report also shows that over the last ten years, the UK has created a ‘tax waste mountain’ of GBP88.6bn. According to the website, 2012 represents the second highest tax wastage figure in that time. It comes second only to last year’s GBP13.5bn.

Breaking the figures down, Unbiased.co.uk says GBP7.26bn will be wasted in unclaimed income-related tax credits, with GBP2.45bn going on the failure to make use of tax relief on pension contributions. A further GBP997m is expected to go in wasted tax relief on charity donations, while GBP448m will be lost on inheritance tax waste. GBP403m will be wasted through unclaimed tax-free savings use, with GBP401m lost on the failure to claim child benefit. Penalties for the late filing of tax returns will cost GBP307m, the failure to use employee share schemes GBP118m, and the wasting of income tax and personal allowances GBP83m.

Despite this large bill, Unbiased.co.uk found that 85% of UK taxpayers state that they have not done anything in the past 12 months to reduce the amount of tax they pay. 50% believe they are already being as tax efficient as possible, with 27% unaware of how to become more tax efficient, and 14% stating they did not know why they haven’t taken steps to reduce their tax liability. Of the 15% who have taken action, 40% have changed the way they save or invest their money, while 22% have made a specific tax efficient purchase or investment.

Karen Barrett, Chief Executive of Unbiased.co.uk commented: ‘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 GBP421 up for grabs for each taxpayer, we should take some time and effort to ensure that we are being as tax efficient as possible. Our stats show that a quarter of people who have taken steps to reduce their tax liability have done so by enlisting the advice of a professional adviser, such as an accountant or independent financial adviser.’

‘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,’ Barrett concluded.

The report is available here.

(CCH Global Daily Tracker News)