My Mother certainly did. Not that I took much notice. It’s not always easy to take advice is it; especially when you think you know best…
This is not dissimilar to how many people view their finances. As we entered the new tax year, it struck me just how many potential new clients we were seeing that were wasting money by not making the most of their tax allowances.
Now, I know life is busy, especially if you are working, but surely you are not too busy to stop and think about reducing the tax you pay? After all, you don’t go to work with the intention of lining the Government’s coffers do you? Your disposable income and what you accrue in the long term is the priority, right?
Yet research from Unbiased highlighted in 2015 that us Brits wasted £2.9 billion by not making the most of tax relief on pension contributions. Just under half as much again was lost by not using ISA allowances. This number is likely to increase significantly now there is a higher contribution threshold for NISA’s of £20,000 for the new tax year.
Let’s also not forget the money lost to HMRC via Inheritance Tax and Capital gains tax.
This all adds up to £4.9 billion being wasted each year by not using allowances.
Of course, this is just at a basic level too. When you consider the more complex arrangements with income tax thresholds and the loss of allowances, the tax wastage will soar.
My view is simple: don’t be a busy fool. Stop and think about the tax you pay. Most of us (not all) think we pay too much tax but it’s no good complaining. Do something about it.
Now, I grant you, the tax system appears to be getting more and more complex. Of course it is. This way you are highly likely to waste more money! The Government rely on people not planning effectively. Greater tax efficiency however is likely to create more personal wealth, which over time increases the choices you and your family have.
An example I came across towards the end of last year highlighted the importance of seeking expert advice, as early as possible. A change in personal circumstances around work and relationships had led to someone making emotive decisions about what they wanted to do. By the time they had got to us it was already too late; they had executed their strategy. We would have liked to have wound the clock back because we could have potentially saved them £79,000 in tax!