Mr Taxman, have pounds 5.5bn

Through ignorance, laziness or bewilderment, British taxpayers hand huge amounts of money to the Revenue each year. Nic Cicutti finds the leaks

The generosity of UK taxpayers knows no bounds. We are so generous that this year 35 million of us will pay almost pounds 5.5bn in unnecessary taxes. The money we give back to the Inland Revenue is the equivalent of 2.5p in the pound off our taxes. It represents 6.6 per cent of all tax collected, enough to buy everyone in Britain a return ticket to Brussels on the Eurostar and throw in a bottle of champagne each for good measure.

Meanwhile, in the build-up to the general election, the Labour and Conservative parties are accusing each other of secret plans to increase the taxes we pay.

Robert Browne-Clayton, chief executive at IFAP, says: "It is still too early to say what effect the general election will have, but it is clear that higher taxation is likely, no matter which party is in power.

"The amount of money paid unnecessarily to the Inland Revenue each year is staggering. Taxpayers must get their financial affairs in order before they start paying more."

The amount we waste amounts to about pounds 158 per person per year, according to IFAP's survey, carried out on its behalf by Mintel, the research organisation.

Mintel analysed data supplied by the Inland Revenue's own Personal Income Survey to arrive at its own assessment of how much unnecessary tax is paid.

Up to pounds 1.04bn is wasted by taxpayers with long-term bank and building society accounts who do not have Tessas and 5.3 million non-taxpayers who have not registered to receive gross interest;

Some pounds 867m is wasted in inheritance tax because we do not plan ahead and use a combination of tax avoidance measures to minimise our bills;

More than pounds 870m is wasted by not paying company bonuses through profit- related pay schemes, at least until 1998, when they are due to peter out over a two-year period;

A further pounds 767m is shelled out by unit and investment trust holders - and many shareholders - who do not make full use of their personal equity plan allowances. Peps allow savers to roll up profits on investments free of capital gains and income taxes;

Up to 1.4 million people, including many married couples, "mislay" an additional pounds 607m, simply by failing to claim their allowances where only one person is working;

Higher-rate taxpayers who are members of company pension schemes waste pounds 419m by not making the best use of their pension top-ups, called additional voluntary contributions (AVCs) or free-standing AVCs;

Unnecessary capital gains taxes paid by small shareholders who do not use their exemptions properly, or fail to use their CGT-exempt Peps, cost pounds 318m;

A combination of Inland Revenue error and interest and penalties incurred for late payment of tax cost up to pounds 215m;

Almost pounds 160m is paid into endowment policies by savers who do not have a friendly society policy, which would be tax-exempt up to pounds 25 a month. Higher-rate taxpayers who buy life assurance but do not use tax relief by linking it to a personal pension contribute to this amount;

Charity donations that are not made through Gift Aid, the tax-free vehicle introduced by the Government in 1987, add a further pounds 119m, while the final pounds 97m comes from investors who opt for National Savings products or gilts but fail to reclaim tax they are entitled to or choose the wrong product.

Mintel also looked at self-assessment, a reform to be introduced by the Inland Revenue in April this year. Potential pitfalls of the system include the heavy penalties likely to be levied if taxpayers fail to fill in their forms correctly and on time.

Mintel looked at a trial carried out by the Inland Revenue in Leicester in 1995, where a significant proportion of the forms were sent in late or contained errors. Based on the Leicester sample, Mintel estimates the additional unnecessary costs to be borne by the taxpayer could reach pounds 1.4bn. This is disputed by the Inland Revenue, which argues that its system has been refined in the light of the trials and is now among the simplest and easiest to understand in the worldn

For a list of three IFA Promotion-backed independent financial advisers near your home or place of work, call 0117 971 1177. However, remember that the advisers are not screened for their tax expertise. Be sure to ask them what their qualifications are.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
football
Life and Style
Jack Cooksey goes for the grand unveiling - moments before dropping his new iPhone 6 on the floor
iphone launch
PROMOTED VIDEO
Life and Style
Life and Style
Customers look at the new iPhones on display at the launch of the new Apple iPhone 6 and iphone 6 plus at the Apple IFC store in Hong Kong
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Sport
Andros Townsend is challenged by Vladimir Volkov
football
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Audit Manager Central Functions

    To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

    Credit Risk Audit Manager

    Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week