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 TaxAction research conducted by unbiased.co.uk and Prudential. 

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.

The biggest tax mistake is failing to use pension tax relief, estimated to be costing taxpayers £2.9bn a year.

Les Cameron, tax specialist at Prudential, said: ‘By failing to plan efficiently, many of us are simply not maximising the available value of our hard-earned savings.

‘Making the most of your money is primarily about the right investment choices, followed by the best use of the various tax reliefs and allowances on offer. Put simply, greater tax efficiency increases the prospect of a better return.’

Karen Barrett, chief executive of unbiased.co.uk, said that the research ‘shows a significant rise in the amount of tax set to be wasted this year compared to 2014. Shopping around for the best deal continues to be put forward as the solution for everyday items, but many consumers have still not reaped the benefits for their finances'.

‘Millions of UK taxpayers are putting their money into taxed saving and investment products, when there are substantial reliefs, allowances and better rates readily available,’ Barrett added.

Prudential and unbiased.co.uk have produced a handy guide to allowances and requirements for pensions tax relief, IHT, ISAs and capital gains tax. The guide is available here: https://www.unbiased.co.uk/tax-guide.pdf

The TaxAction Report 2015 is based on an online survey of 2,003 UK adults and has been produced by Opinium Research on behalf of unbiased.co.uk. All figures are based on calculations done on unrounded values to guarantee accuracy.