This year, 151 days of your pay will go to the Government in tax. The day on which you achieved tax 'freedom' (after the start of the new tax year in April) was 1 June. Is it fair?
Much can be done to reduce your tax burden, irrespective of whether you think it's fair or not, says Unbiased.co.uk
Tax Freedom Day, marks the theoretical point in the year at which we stop working for the government and start working for ourselves*.
But Unbiased.co.uk, an organisation promoting the benefits of independent financial advice, is urging individuals to take action and reduce the amount of tax they pay each year and therefore to bring their Tax Freedom Day forward.
Reduce your tax-waste
And with an average of ¯¿½160 wasted on unnecessary tax liability per person this year**, it seems action is urgently needed.
David Elms, Chief Executive of unbiased.co.uk commented "Tax Freedom Day is a key date in any UK taxpayer's diary as it highlights just how much we pay into the taxman's pockets each year. But there are many ways in which we can reduce our tax liability.
Our research shows that the UK as a whole wastes a whopping ¯¿½7.9 billion in unnecessary tax payments each year, so why not take action now and make sure that your finances are as tax efficient as possible?
Everyone can take action to bring their personal Tax Freedom Day forward and the best thing is there is help at hand in doing so.
Why not find an independent financial adviser in your area, who will be able to review your financial situation to ensure you only pay the tax you have to.
- Search for an IFA in your area
IFA Promotion's annual TaxAction** campaign, now in its fifteenth year, reveals that the UK as a whole will waste ¯¿½7.9 billion this year in unnecessary tax. That's enough to create a new millionaire every day for the next twenty years!
However, despite 27 million (62%) of us claiming to resent rising tax bills, nearly three quarters (74%) admit to doing nothing to help reduce the amount they pay.
Take a few simple steps to stamp out tax wastage for good:
If you have assets of over ¯¿½300,000: Plan your inheritance - an extra ¯¿½1.6 billion could go to chosen heirs by planning properly to avoid IHT liabilities. IHT is often lost through not writing life assurance policies in trust, not thinking about inheritance tax allowances and, worst of all, by not making a will at all.
If you save: Use up your annual ISA allowance - £382 million in tax could be avoided by sheltering investments in ISAs, or moving savings from an ordinary deposit or savings account to an ISA. Also consider a Friendly Society savings account or products from National Savings & Investments as tax-efficient savings options.
If you are eligible: Claim your tax credits - ¯¿½2.3 billion of 'free money' is up for grabs from HMRC and the DWP, in the form of Pension Credits, Child Tax Credits and Working Family Tax credits.
If you fill in a tax return: Sort out your self-assessment - ¯¿½463 million waste could be wiped out by all forms arriving present and correct by the 31st January deadline. Self-assessment forms received after the deadline incur penalties of ¯¿½100; further penalties and errors make up the balance of tax wasted in this way.
,b>All taxpayers: Maximise your personal tax allowances - ¯¿½546 million goes begging each year, ¯¿½322 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further ¯¿½224 million by taxpayers not transferring savings accounts to non-taxpaying spouses, if appropriate, so that the tax liability on the savings is lower, or none.
Pension savers: Top up your pension pot - ¯¿½739 million could be spared by optimising contributions to personal or company pension schemes, or making Additional Voluntary Contributions.
If your employer offers an employee share plan: Take advantage of it - ¯¿½171 million is up for grabs for the estimated 600,000 staff currently in Profit Related Pay schemes.
If you have capital gains: Use your allowance efficiently, perhaps by transferring assets between spouses to make the most of both of your CGT allowances - ¯¿½510 million could be saved in this way.
If you give to charity: ¯¿½1 billion more could go to good causes by using tax-efficient means of charitable giving, i.e. using a deed of covenant, Gift Aid or payroll giving.
If your child or grandchild is eligible for a child trust fund: Avoid waste by using up the tax free saving potential - ¯¿½125 million in tax could be saved every year.
As a first step to stamping out this waste, visit IFA Promotion's dedicated website at www.taketaxaction.co.uk. The site contains tips on how to save tax, an online tax wastage calculator, and a guide to saving tax.
You can also find details of local IFAs on the site or by calling 0800 085 3250.
