Taxpayers overpay £4.9bn due to complex tax rules
UK taxpayers are set to waste as much as £4.9bn this year in unnecessary tax payments as they fail to claim all available tax reliefs due to an increasingly complex set of tax rules and reliefs
The £4.9bn set to be overpaid this year translates into £165 on average per individual taxpayer, up from £161 in 2014, according to the 2015 research say Harris & Co accountants Northampton #accountantsnorthampton.
Despite the tough economic climate, 45% of those surveyed felt they were paying the right amount of tax, although three quarters had not reviewed their tax planning in the last 12 months.
Inheritance tax (IHT) is one area where complex tax rules mean that taxpayers are not using all the available reliefs.
The research estimates that there was overpayment of £550m in IHT as individuals are not placing life protection policies ‘under trust’. This can reduce a £100,000 life insurance payout by as much as £40,000 if an individual’s total estate is worth more than £325,000.
Capital gains tax (CGT) is another area where use of tax reliefs is often ignored, amounting to some £158m in overpaid CGT as taxpayers are not aware that they have an annual CGT free allowance, which for the current tax year stands at £11,000. Any gain above the allowance is charged at 18% for lower and 28% for higher rate taxpayers. Here again, better use of ISAs as a savings vehicle would reduce tax bills.