Money: A pounds 5bn windfall for the Revenue

At least 35 million Britons are wasting chances to bring down their tax bill, Steve Lodge discovers

Three in four adults are paying an average of pounds 158 in unnecessary and legally avoidable tax every year, according to IFA Promotion, a body that promotes independent financial advisers. In total, IFAP estimates that 35 million Britons are paying in all pounds 5.5bn in "wasted" tax, equivalent to nearly 7 per cent of all personal taxation collected by the Inland Revenue.

Building society savers who have not taken out a tax-free Tessa account are one big group (see our special report on Tessas starting on page 19).

In addition, there are more than 5 million non-taxpayers who, though not liable for tax on interest paid by a building society account, are losing out by not registering to get that interest gross, or by not claiming back their deducted tax.

Most building society interest is paid net of basic-rate tax, and higher- rate taxpayers are required to pay another 20 per cent through their tax return. Non-taxpayers, however, can fill in an IR85 form (available from the bank or building society) to receive the interest without tax deducted. Any interest already deducted can be reclaimed by contacting the Revenue. Further, much tax can be saved by transferring savings to a spouse paying a lower tax rate.

Another "waste" is failing to have life insurance policies written in trust - a procedure easily carried out, which allows the proceeds of a policy to be free of inheritance tax when you die.

PEPs also save on tax. Many savers holding privatisation shares are being paid dividends that are taxable. It may be worth while making these shares into PEPs to get tax-free dividends. Or you could swap your shares for an off-the-shelf unit trust PEP.

People holding National Savings certificates and not claiming their money when the certificates mature account for pounds 30m of unnecessary tax paid a year; on maturity, the rate of interest drops and becomes taxable.

Britons are also paying more than pounds 200m because of Revenue errors and because they are charged interest and other penalties for late payment of tax. And, warns IFAP, things are likely to get worst under the self- assessment system of tax payment which begins this year.

q To help put your financial planning in order, IFAP is offering readers a free, no obligation, half-hour consultation with a local financial adviser. Call 0117 971 1177.