Britons are paying £7.6 billion in excess tax, says study

Britons are paying £7.6 billion in excess tax, says study

	Published : Fri, 03 Mar 2006 17:00 By : Phil Bateman Print this Story

LONDON: Four out of five adults are paying more tax than they are required to pay because they either fail to claim rebates or they do not make any tax planning. On an estimate, such excess payments amount to 7.6 billion pounds in 2006, which the treasury gets by way of gratis, says IFA Promotion (IFAP), an organisation representing 9,000 independent financial advice firms.

IFA Promotion said nearly 82 percent of adults are found not to make use of the most of tax-efficient systems or allowances available to them.

IFA Promotions' chief executive David Elms said the failure to claim tax credits is just one way of gifting unnecessary and vast sums of money to the taxman each year.

He said the government has set aside 13.3 billion pounds to pay for tax credits in 2006 but around 2.9 billion of that would go unclaimed unless more people applied for the pension credits, child tax credits and working family tax credits to which they were entitled.

IFA Promotions interviewed some 2,000 people for the study.

Another area where people did not apply their mind was tax planning. Around 1.3 billion pounds is paid in inheritance tax each year, which could be avoided if people took a few hours off to write a will, complete a discretionary will trust or write their life insurance policies in trust.

IFA Promotions said people could save 548 million pounds by making the most of their personal tax allowances -- 319 million pounds wasted each year through non-taxpayers failing to claim back tax and 229 million pounds squandered by people not transferring savings accounts to non-taxpaying spouses.

It said self-assessment taxpayers will contribute to the exchequer 487 million pounds by failing to get their forms in by the 31 January deadline, making mistakes and incurring further penalties.

Excess taxes are also paid by not participating in employee share schemes, not making the most of capital gains allowance and failing to give money to charity in the most tax efficient way.

However, the Treasury said 79 per cent of families entitled to Child Tax Credit had claimed it. Paymaster general Dawn Primarolo said in a statement that tax credits are reaching more families than any previous system of financial support, with nearly 20 million people benefiting from them.