British taxpayers are handing over £12.6bn a year more in tax to HMRC than they need to, according to new research. This translates into £421 being wasted per individual taxpayer. Over the past ten years, taxpayers have collectively overpaid by a phenomenal £88.6bn.
The biggest area of tax wastage in 2012 is through tax credits, resulting in £7.26 billion being lost through people failing to claim their child tax credits, working tax credits and pension credits.
Failure to make use of tax relief on pension contributions is the second biggest area of tax wastage (over £2.45 billion) followed by inefficient charitable donations (over £997 million).
Overpaying income tax, by being on the wrong PAYE tax code for example costs a whopping 83m.
The below shows how the headline £12.6bn wastage figure breaks down into individual tax areas.
- Income-related tax credits £7.26bn
- Tax relief on pension contributions £2.45bn
- Tax relief on charity donations £997m
- Savings on inheritance tax (IHT) £448m
- Making use of ISAs £403m
- Child benefit £401m
- Penalties for late filing of tax return £307m
- Savings on capital gains tax (CGT) £133m
- Making use of employee share schemes £118m
- Income tax and personal allowances £83m
Despite the large amount of money gifted to HMRC, 85% of all Brits said that they haven't done anything in the past 12 months to reduce the amount of tax they pay.
With the ongoing strain on our finances, you owe it to yourself to take 'tax action' today and improve your tax efficiency! Talk to taxback.com to check whether you could be due a PAYE refund and watch this space for some more tax cutting tips!