UK set to waste £4.6bn this year in unused tax allowances
A joint campaign by Unbiased.co.uk and Prudential – TaxAction 2016 – exposes the mistakes taxpayers make which mean they overpay by several billion pounds.
Reasons for this include not making full use of the available tax-free allowances on savings and investments, or failing to plan their estate properly before death.
But in comparison to last year’s figure of £4.9bn, the UK this year improved by minimising the amount of tax wasted by £300m.
What are the biggest areas of waste?
- Pensions: the UK public could collectively save £1.9bn by contributing more to their pension pots, based on the average £2,840/year saved into a pension which gains £658 of tax relief. Around 3.4m adults are currently employed but not paying into a pension, though 1.7m more people took up a workplace pension scheme in 2015. The public cite the complicated nature of tax and their limited knowledge of it as the reasons for the widespread wastage.
- Cash ISA: there are around 65m current accounts in the UK, but only 10.29m people use cash ISAs which means a potential 54.7m cash ISAs could be opened which could save over £1.89bn through tax-free interest, based on average deposits and interest. Unbiased says the people who currently have cash ISAs have been saving more into them which has increased the gap between those who do and don’t use ISAs.
- Inheritance tax: Families could save around £595m with some simple estate planning.
- Capital gains tax: On assets, overpaid by £208m.
- Stocks & shares held outside of ISAs: Overpaid by £134m.
- Junior ISAs: an extra £2.2m could be saved in tax if Junior ISAs saw the same rate of uptake and savings activity as was seen with the more publicised Child Trust Funds.