Despite a large number of people in the U.K feeling a strain in the current financial climate, 83% of British people have admitted to making no effort to reduce their tax burden, according to a report from TaxAction. Despite inheritance tax being named the most resented tax by 20% of UK adults, unnecessary payments are still set to reach over £360m in 2008. TaxAction’s report also stated that almost a third of British taxpayers would opt for a change to the current income tax system but, despite this call for change, 2008 will see £474 million wasted on personal tax allowances.

Those who have assets worth more than £312,000, including their home, can retrieve at least some of this waste however. An extra £1.9 billion could go to chosen heirs by planning carefully to avoid inheritance tax (IHT) liabilities. IHT is lost through not writing life insurance policies in trust (where the proceeds of life insurance are excluded from the overall estate of the deceased), not taking inheritance tax allowances into consideration and by neglecting to make a will.

It’s always worth planning ahead when it comes to taxation. An estimated £479 million in waste could be saved if all self assessment forms are filled in correctly and are received by the Government on time, as forms received after the January 31st deadline incur an automatic penalty of £100. Maximising your personal tax allowances could also help to retrieve some of the unnecessary tax payments, as £330 million is wasted through non-taxpayers failing to claim back tax on bank and building society savings accounts, with a further £144 million going begging by taxpayers not transferring savings accounts to non-taxpaying spouses, so ensuring that the tax liability is lower, if not none.

An additional £726 million could also be spared by optimising contributions to personal or company pension schemes. Should your employer offer one, it is also worth taking advantage of employee share plans as £184 million is available to an estimated 600,000 staff currently in such schemes. Using your capital gains tax allowance could also help to retrieve some of the wasted tax pounds. By transferring assets to your spouse, another £264 million could be saved; while using tax efficient means of charitable giving, such as Gift Aid or payroll giving, could provide £936 million for good causes around the country.

So it is possible to retrieve many of the unnecessary tax payments made. It is simply a question of planning ahead and knowing the avenues you can go down in order to make the most of your financial situation and avoid unnecessary taxation.

Disclaimer:
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.