New research shows that people could be missing out on billions of pounds of tax allowances
The new study, conducted by Prudential and unbiased, has estimated that British taxpayers will lose £4.6bn this year by failing to use all of the tax allowances available to them.
If also found that the average taxpayer hands over around £159 in unnecessary tax payments every year through unused cash Isa allowances, sparse pension contributions and over-payments of income tax, IHT and CGT.
The study also found that approximately 7 million people do not pay into a pension scheme, resulting in around £1.9m of unnecessary tax payments each year.
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
“I am always amused by pension companies telling people that they are wasting money paying tax because they could reduce their tax bill by paying even more money to a pension company into a pension scheme so, as many think and in some instances are proved correct, the insurance company managing the pension funds can lose it for them.
“I appreciate the previous comment is somewhat cynical, but pension companies when doing this research never seem to ask if the individual has got the money, in excess of the tax, to pay into a pensions scheme or some form of tax efficient saving. Very often when it comes to monetary maximisation the most effective way of having maximum available money is to pay the tax.
“It is no different to the concept within business that if a business was to spend money on capital investment, such as new equipment, it could reduce its tax bill. This is poor business sense if commercially the new equipment is not needed and it reduces the cash available within the business. Let us be grateful that more people are not saving all this tax, as it would suck cash out of the economy at a time when the economy needs as much consumer spending as possible.
“If there was less consumer spending the rate of growth would be even worse so the stock markets would fall even more and the value of our pensions would drop even faster – I do appreciate if the pension companies had more money, because they would need to buy on the stock market, that would push value up and just think how well the finance people would reward themselves for that!”