5 Billion Wasted In Overpaid Tax
Published / Last Updated on 09/03/2016
5 Billion Wasted In Overpaid Tax.
Canada Life issued figures in its newsletter last month suggesting that UK consumers look set to waste £4.6 billion in unnecessary tax payments in tax year 2015/16.
The main area to save tax is by saving in pensions and research suggests that around 7 million people do not save in a pension scheme, which accounts for nearly £3bn of wasted and overpaid tax.
Over paying tax is because people do not make full use of their allowances nor do they plan early to mitigate otherwise easily avoidable taxes such as Inheritance Tax. In total £4.6 billion is set to be wasted this year (or £159 per taxpayer) across the areas of IHT, CGT and income tax (due to people not making good use of pensions and ISAs).
Area of tax wasted | Amount wasted 2015 | Amount wasted 2016 |
Pensions contributions | £2.9 billion | £1.9 billion |
Inheritance Tax (IHT) | £550 million | £595 million |
Capital Gains Tax (CGT) | £158 million | £208 million |
ISAs | £1.3 billion | £1.9 billion |
TOTAL | £4.9 billion | £4.6 billion |
The nation could save around £1 billion of unnecessary tax payments in 2016 if more people join workplace pension schemes, according to new research from unbiased.co.uk.
Saving Tax
Make additional pension contributions before tax year end.
Make sure your full ISA savings allowances are used. Even if you cannot afford to save £15,000 or so, even if you have £500. Make sure it is inside an ISA so that your interest is tax free.
If you plan to sell assets that are subject to capital gains taxes, usually shares or second properties, make sure you use up all your capital gains tax allowances and claimable expenses as well as if you own the asset yourself but you are legally married or in a civil partnership, you can transfer a share of the ownership to your partner and when you subsequently sell, have two allowances.
Inheritance tax is perhaps the easier to deal with as you can legitimately gift money away, legally invest in investments that can instantly reduce inheritance tax (and no, not the weird and less than wonderful films schemes for the footballers and TV stars) or even simply put money into pensions and those too potentially are tax free on death.
The simple answer is get advice today and save move. Contact us for a tax review.
Read our Tax Year End Newsletters.