While each day seems to bring a new tax, increasing taxes and talks of government budget shortfalls, many investors should be checking that they are making full use of the tax efficient investment vehicles on offer.  Whether you are looking at ISAs (Individual Savings Accounts), a self-select pension fund or trusts, you really do need to ensure you are savings as much tax as possible - after all they are designed to help and encourage you to invest!

The government has recently increased the annual limit for ISAs to some £7,200 per person per year, while the rules on contributing to your pension scheme are fairly flexible, with tax incentives to encourage you.  The subject of trusts is a little more complicated and while it would need specific advice for individual cases, there is real potential to protect some of your assets from both income tax and inheritance tax.

It seems amazing that despite the number of high profile tax efficient investment vehicles on offer, many people still tend to invest in their own name, incurring both income tax and capital gains tax (if you make a profit!).  Perhaps it is time that you took a look at your assets and started to plan ahead for the future.  Short term strategies are ok as a stop gap, but they need to be amended at some stage and the recent increase in property prices has opened many peoples eyes to potential tax liabilities in the future.

It is never too late to start, but you really do need to consider the situation carefully.

Despite all of the back slapping and hand shakes about how they have changed the NHS, the UK authorities are under severe pressure to improve the return on investment.  A report out this week has been very critical of the funding arrangements for the NHS and their ultimate use. So what next?

As every tax payer in the UK will be aware, the budget for the NHS seems to grow and grow (if we believe government figures) yet the services seem to be getting worse in many areas.  A recent government sponsored report was released to calls of “we told you so” from many in the industry who have been very critical of changes and movements within the NHS.

There has been a massive increase in management, red tape and an introduction of the competitive internal market within the NHS, over the last few years.  These changes have not assisted with the level of care on the front line, and caused much anger and unease with many workers.  We are also experiencing an increased level of industrial action from the main unions, who are fighting for the future of the NHS.

So what does this mean in the long term?

It now seems inevitable that at some stage, the tax payer will not be able to depend upon the NHS in its current form.  We have for some time seen more and more services farmed out to the private sector, where charges are introduced to what have been free services.  We have also seen a massive growth in the area of private healthcare, and this is sure to continue and grow in the years to come.

Unfortunately, the NHS is not a bottomless pit and at some stage there will need to be a major restructuring of the original format.  Times have changed and costs have spiralled over recent times, reaching levels that have denied many people the treatment which they have “paid for”. 

Private healthcare is the way forward for many who are looking to protect themselves and their loved ones in the future.

While the tax credits system has been under major pressure of late, the announcement that officials from HM Revenue and Customs have actually broken their own rules regarding the reclaiming of over paid tax credits has set more alarm bells ringing.  The cost of this “oversight” is rumoured to be in the region of £500 million, although the authorities insist it is nearer £20 million.

It seems as though a number of claimants over the last few years were unaware of the fact that their payments were being investigated, with many receiving unexpected demands to repay “over payments” from prior years.  Under strict guidelines the authorities should have written to each claimant being investigated, to make them aware of the situation and what may happen - this task was not carried out for many.

To say that the tax credits system has been a shambles is an understatement, with literally billions of pounds of tax payers money wasted.  What was in theory an excellent idea has turned into a nightmare for the government, and Gordon Brown in particular who introduced the system.  It seems that while many claimants had informed the authorities of changes in their situations, the information was never logged into the relevant systems and over payments / under payments have been common place.  The literature which was sent to many claimants was also very hard to understand, with figures changing on a regular basis!

There have been numerous attempts to resolve the problems with the system but it seems that each resolution is followed by another problem, and the authorities are currently in disarray.  Quite where this leaves the long term viability of the system remains to be seen.

While the UK has one of the best public service systems in the world, the cost of funding this continues to grow, often forcing an increase in taxes.  There are many in the UK who argue that even though taxes have gone up, the quality of public services has gone down.  However, surprisingly, a recent survey indicated that the majority of UK tax payers would actually agree to higher taxes if they could see where their money was going.  Will this ever happen?

The problem with the UK government is their record on wasting money, with computer systems billions of pounds over budget, the tax credit system in disarray - with billions of pounds outstanding, not to mention the mammoth cost of setting the system up.  There have also been hundreds of other schemes which have gone well over budget, including among others the infamous Millennium Dome.  How can the authorities regain the trust of the UK public?

Government, trust and the public are not three terms which normally go hand in hand, with the public often sceptical of where their taxes actually go to.  Perhaps a more transparent system would work better if the tax payer could actually see where their money was going, which departments and if it was working.  One of the main gripes against the government has been the fact that all of the many budget over spends actually come out of the tax payers pocket, when in business there would be compensation and penalty payments if projects were not brought in on time, and on budget.

A more transparent system would give the public more confidence - that is assuming that the government have nothing to hide!

While there are literally millions of people in the UK who at one time have over paid their taxes, it is never easy to claim your over payment refund.  Whenever you owe the government tax, they will be on to you in double quick time, but it is not quite so simple when it is the other way around.  This begs the question, are you paying the correct tax?

There are a number of reasons why your tax code may change throughout your life time, which include marriage, age, retirement, etc.  As you would expect, the authorities are very keen to put the onus onto you to ensure that your tax code is correct.  In the event that you have been charged too much tax, then you are able to apply for a rebate, but this can often be a long and tedious process bearing in mind there are potentially millions of UK residents in the same situation.

To ensure that your tax code is up to date, it is vital that you check the tax code on your next pay slip against the codes listed on the following internet page :-

UK Tax Codes

Is it correct? Does it relate to your situation?

There are also an array of tax free allowances which you may be able to utilise which are listed on the internet page below :-

UK Tax Allowances

It is essential that you monitor your tax situation, what you are paying and what you expected to be paying.  If you don’t help yourself, you can guarantee that the authorities wont!

Over the last couple of days we have seen both the Labour and Conservative Parties going head to head on the subject of taxes, and specifically the much disliked inheritance tax (set at 40%).  The announcement that the Tories would consider abolishing the tax if they were to win power at the next election has been met with laughter by Labour ministers, but is that the true picture?

Since the fall of the last Conservative government, the Labour party have increased both tax income, increased spending on public services and presided over a strong economy - well that is what they may have you believe.  Underneath the headline grabbing economic figures, there is a different picture with Gordon Brown regularly accused of double counting and using smoke and mirrors in his time at the Treasury.

Subtle tricks such as increasing allowances below the rate of inflation have allowed the Labour party to boast that allowances have always gone up, when in reality they have been falling in real terms for many years.  The inheritance tax threshold is one such tax allowance which has increased by no where near the rate of inflation, never mind the rise in house prices - which make up the bulk of an individuals asset in the UK.

The current government claim that only 6% of estates actually pay inheritance, but there are many who believe that this figure is set to increase dramatically over the next few years.  The current threshold before tax is paid on an estate is £300,000, a figure which is set to rise to £350,000 by 2010.  Against an average UK house price of £150,000 this may not look too bad, but a recent report has claimed that more than four in ten homes will be valued over the inheritance tax threshold over the next 5 years - resulting in a massive increase in inheritance tax income for the government, especially when you add on other assets held in an estate.

We seem to be falling back in to the traditional tax and spend debate which has so often been the main difference between Labour and the Conservatives.  The fact that Gordon Brown was Chancellor when many of these “stealth” taxes were introduced should make for some interesting debates over the coming months.

While the writing of a Will is a subject which many of us tend to shy away from, it is becoming more and more essential to ensure that your finances are in place should you pass away unexpectedly. 

Wills are not just for the elderly, they should be used as tools to protect your family, friends and partners and ensure that your wishes are carried out.  You would be surprised how many estates end up in court, with friends and family at each others throats!

There is a myth that Wills are complicated affairs and can only be completed by solicitors or lawyers, when in reality they are as complicated or as simple as the writer so wishes.  There are many websites on the internet which will advise you about writing your own Will, what to do, when to do it and how to complete the wording.

There are a number of standard instructions which need to be included in any valid Will, many of which can assist in reducing the high level of inheritance tax levied on estates of today.  It is vital that your tax planning is up to date in order to ensure that those who you wish to benefit will do so, in the most efficient manner.  Discretionary Trustees and gift allowances are some of the more common and simpler ways to ensure that you estate is left in good shape for those left behind.

It seems that the authorities continue to see estates as a great source of extra taxation, and it is highly likely that we will see further relative increases in the tax return from this area of finance.  Ensure that you protect all which you have worked for, even in death, and make your Will as efficient as possible.

As some of you may be aware, it was recently announced that over one million incorrect tax demands where sent to the UK population, resulting in hundreds of millions of pounds in excess tax being received by the authorities.  While it will take some time, the majority of those who received incorrect tax demands should see their over payments returned, although there are many suffering who have no idea.  Do you know your tax code and what it means?

The UK has a fairly complicated income tax systems which has been in place for many years, and while there have been attempts to simplify the system they have made little real progress.  Depending upon your age, employment record and marital status to name but a few, you will receive a tax code in relation to income tax.  Different tax codes will allocate certain tax allowances and tax rates to your income, with the income tax element collected at source - i.e. through the PAYE (Pay As You Earn) system.

Have you checked your Tax Code?

Do you know what it is and what it should be?

Surprisingly enough, the majority of the UK working population have no idea what their tax code relates to, and even if it is correct.  There are many sites on the internet which will give you the details of each different tax code, and the one which best suits you own situation.  It has be shown that many UK workers have been on the wrong tax code for years, resulting in massive over payment of taxes, often for long periods.

If you are able to prove that you have been overcharged and should have been on a different tax rate, there is every chance that you can reclaim the over payments.  Rather than trivial amounts, any long term over payment could result in the return of thousands of pounds - something which no doubt you could put to better use!

If you are in any doubt about your tax situation, and whether you may have been overcharged, there are masses of accountants online to assist.

While the UK taxation burden increased dramatically under the leadership of Tony Blair, it is about to get a whole lot worse under the leadership of Gordon Brown, the Ex-Chancellor of The Exchequer.  Below we have listed at least 10 weird and wonderful ways which the Government will use to tax you yet further - many without you even realising!

Orphan Assets

Many financial institutions such as insurance companies have sizeable ”orphan assets”, which are basically assets which may be the excess from with profits reserve funds, policies which have not been claimed or dormant bank accounts.

While many of the financial institutions have shareholders, not to mention massive customer bases, the Government have decided that they should be able to take these funds and use to fund their spending plans.  Is Gordon Brown turning into a modern day Robin Hood or is this just day light robbery?

While many will dismiss this as not worth talking about, the figures at stake actually run into billions of pounds, that is billions of pounds created by investors, clients and the like. Plans are already in place for this facility to be introduced in the short term (possibly this year) although the Government have managed to keep this tax grab fairly quiet.

Pay As You Travel

Even after the massive ground swell of public support against introducing pay as you go travel - whether this would be for the cars, bikes or scooters - the Government still believe that they know best.  In a massive snub to the public’s view of the idea, the authorities are already well down the line with regards to introducing pay as you go travel, cleverly disguised as a “green tax”.

The truth is that the authorities have been looking to use the “green” lobby as a smoke screen for tax increase for a number of years, and it just happens that with the subject of global warming high on the agenda, they think they can rail road the public.

Taxing Household Waste

This is perhaps one of the more cheeky attempts to extort yet more tax from the UK population, with the planned introduction of a waste tax.  Despite the fact that council taxes continue to rise, yet refuse collection has been cut to once every two weeks in many areas of the country, the public are looking at yet more taxe charges for not “recycling” their waste.

The fact that many areas of the country are over flowing with bin bags which can be around for anything up to two weeks, is of no interest to the authorities, never mind the increased risk of rats,. etc.  This is the most blatant case of increased taxes, less services and more pressure on the public to do it themselves.

Taxation Increases On Alcohol

Again this is one of the most bizarre taxes bearing in mind the UK government have just pushed through 24 hour drinking, then again, more time to drink, more sales equals more tax revenue?

Not with standing the increased sales, the authorities are now looking to tax certain drinks which are being targeted at the younger end of the market.  The very same drinks supplied by the companies which are already charged tax by the authorities on their business activities -  a case of double taxation?

By targeting minority areas of society the government are leaving themselves open to charges of victimisation, with many believing that this is only the thin end of the wedge.  As the taxation increase slowly moves up the society chain, we will all see a steady increase in our taxes.

Increased Airport Tax

Even your sacred holiday will soon come under more taxation pressure with the government set to push ahead with an increase in airport taxes - all in the name of the environment!

Again, the authorities have encouraged the massive rise in air travel, and especially the low cost airlines who bring in much need income and tourists to the country.   However, the market is now of a size where it can no longer grow at the same rate, and the authorities are keen to increase there tax take.  “Green” taxes, a great idea, and set to bring in about £1 billion a year!

Fat Tax

If the proposed “fat tax” were target at any other area of society there would be a massive backlash and calls of discrimination.  However, for some reason the food industry has become one of the main targets for increased taxes, under a variety of guises.

The “fat tax” is the latest attempt to “help” society although surely extra investment into the problems of obesity should start with the health service, and support groups? This tax is set to bring in millions for the authorities, and yet again may just be the thin end of an ever expanding wedge.

EU Tax On Children’s Wear

For many years the UK has had a 0% VAT policy on all children’s clothing, which includes nappies.  This looks set to change with the EU using the powers of control which the government recently handed over to them, to push through taxation “harmony” across Europe.

Many of the UK public are unaware that children’s clothing etc does not attract VAT charges, but they may soon be in for a shock!

Property Stamp Duty Increase

While the UK property market looks set to continue for at least a little while yet, the authorities look set to increase the rate of stamp duty on all house purchases, in a move which will raise millions of pounds.  The fact that the market is still moving ahead will be the perfect cover for this latest smash and grab, with many investors awash with profits, and not overly concerned about any “small” increase.

Will these same parties be quite so understanding when the market falls back, and their costs increase?

Bizarre But True

For our last two tax charges we take a look at some of the most bizarre changes ever to been discussed in Parliament.  These include :-

A Chewing Gum Tax

Seriously, this proposed tax has been mentioned on a number of occasions and as bizarre as it may sound it has actually received a number of “hearings” in the houses of parliament.  The MP who has suggested this claims that the extra cost of cleaning the streets of chewing gum should be covered by the consumer - but would any tax income ever really reach the everyday street cleaning services?

I doubt it very much.

“Second Life” Tax Charge

As many of you may be aware there has been a massive increase in the number of people using the internet to participate in “reality worlds”.  Second Life is the leader of the sector with millions upon millions of players worldwide, and a “virtual”  economy which is growing everyday, having made a few people real life millionaires.

The virtual currency, the “Linden”, is actually acquired by converting real life currencies into “Linden” money and investing in Second Life.  Many people have grown virtual businesses and property portfolios then cashed in, taking their funds out and converting their “Lidnen” dollars back into “real” money.

It is this conversion to “real” money which the UK authorities are taking a great interest in, and despite the fact that the “Linden” is only a virtual currency they are trying to find legal ways of taxing the returns of individuals.  “Virtual world”, real taxes - whatever next?

A National Audit Office report which has been released this week shows that the Tax Credit System is losing up to £1 billion a year due to fraud and errors.  Those who have had the misfortune to get caught up in the never ending trail of paper, phone calls and differing advice will no doubt be unsurprised by the system.  There have been reports of multiple offers, each differing greatly in size, information missed, back payments reclaimed and so on, the list is endless.  However, the system plays a major part in assisting those less fortunate than many in society, so what can be done to make it work?

Unfortunately is seems that a mixture of bad training, a lack of communication and a computer system which is being pushed to the brink have all contributed to the problems.  It is therefore no surprise to find that the system has, and continues to be, a major target for the fraudsters and the mis-claimants.  By the time the authorities find out that they have a problem, and contact the fraudsters, they will be long gone with their payments cleared and buried away.

Bad debts have also been a major problem, but when you bear in mind that some over payments have only surfaced 4 years later, and they are paying out to the needy of society anyway, it comes as no surprise that many people are not in a position to pay funds back .  Figures show that of the £2 billion plus over payments from 2003-04, almost half has still be to recovered. 

The Treasury recently took over the day to day running of the system from the Inland Revenue, a move applauded by many, although just as many are yet to be convinced there will be any change in the level of performance - from an Inland Revenue which sent out inflated tax demands to over 1 million UK residents last year..

The Tax Credit system was a great idea which has been badly let down by the performance.  Quite how the government will be able to get the system back on track remains to be seen, and perhaps more importantly at what cost?

As more and more of the working population feel that they are being taken to the dry cleaners UK tax payers are finally beginning to fight back.