Research from the Unbiased.co.uk website, which helps UK consumers contact Independent Financial Advisers (IFAs), has unveiled some shocking facts about the amount of tax Briton’s pay each year.
The latest Tax Action report from Unbiased.co.uk claims that the average person in Britain overpays tax to the tune of £421 each year by arranging their finances inefficiently. The total in overpaid tax is £12.6 billion.
The research shows that child tax credits are the biggest area where money is wasted with over £7 billion left unclaimed by parents.
Failure to fully utilise the tax relief on pension contributions costs an extra £2.45 billion each year with inefficient donations to charity costing nearly £1 billion.
Tax efficient savings
Financial experts point out that arranging savings in a tax efficient way is crucial in these times of low interest rates.
Shopping around for a best buy savings account is not enough; savers should ensure they use their Cash ISA allowance and consider other tax free savings options such as Junior ISAs and certain National Savings & Investments (NS&I) accounts.
According to the research around 50% of people know they are overpaying tax, however only a sixth admits to making changes to their financial planning to address the problem.
The inefficient tax arrangement means each year the average worker in the UK pays 149 days of their salary in various taxes.
Reacting to that statistic Karen Barrett, Chief Executive of Unbiased.co.uk said: “Although it’s nice to be able to think that you have stopped paying the taxman and started paying yourself, five months is still a significant amount of the year and our research reveals the top areas where we could be drastically reducing the amount we waste through unnecessary or unclaimed tax,” she said.
Barrett continued: “Those looking to tackle their tax properly and ensure the right structures are set in place for their future should speak to an independent financial adviser who can offer guidance, advice and, more importantly, help you take action.”