Are you giving £13.5 billion to the taxman when you don’t need to?
You would think that, in the middle of a recession, people would be loathe to pay the taxman what they owe, let alone pay tax unnecessarily, but according to a report issued today by www.unbiased.co.uk that is exactly what the UK populace is doing, to the tune of £13.5 billion a year.
Unsurprisingly, £8.5 billion, or 63% of that total comes from tax credits, successful and accurate completion of such claims requiring an IQ of 150+ and several wet towels and darkened rooms. No, not for that, for applying to your head. Presumably of course, with the restrictions to these credits taking effect from April 2011 (removal of entitlement for those earning over £40k. Supposedly. Details are not yet known) the number of people affected will drop, and so will the losses owing to incorrect claim.
The report also claims that those in the South East are the worst offenders, with £1.8 billion unnecessary tax payments arising from this region. Clearly they have more money than sense.
Karen Barrett, chief executive of unbiased.co.uk, said: 'Significant amounts [of tax] are being wasted which could so easily be avoided by people taking action…while consumers are increasingly aware of saving money by switching utilities provider or using online money-saving websites, they could actually be saving themselves even more by being tax efficient and not giving away more than they should to the taxman."
The £13.5 billion can be further broken down into ‘error’ waste and ‘avoidable’ waste, the former being reclaimable if the error is spotted within the time limits for claim. The avoidable proportion though, almost £3.7billion, could be legitimately avoided by a change in behaviour, such as making use of tax favoured savings schemes (eg ISAs). The highest tax offender in the avoidable category was inheritance tax, where forward planning can do wonders, but where there is little room for manoevure after the event. The event in question being death. Mind you, don’t suppose you will care too much at that point…
So why is the taxman laughing all the way to the bank? 88% of people surveyed in connection with the report had done nothing in the last 12 months to become more tax efficient, and 45% stated that this was because they believed they are already being as tax efficient as possible; over a quarter (28%) of people didn’t know how to go about being more tax efficient and more than one in ten (12%) simply didn’t know why they hadn’t taken steps to reduce their tax liability. Idiots.