'Cash in hand' payments reach £6.6bn

The black economy has been fuelled by cash-in-hand payments of £6.6 billion over the last year, according to a TaxAction report from Unbiased.co.uk.

It emerged that one in four British adults had paid in cash for a product or service, in order to avoid paying tax.

However, the site's chief executive David Elms says people can save hundreds of pounds in tax legally and should not resort to breaking the law.

"It is staggering that one in four UK consumers will happily save themselves an average of £97 in tax by paying for services in cash, thus avoiding VAT, but continue to waste an average of £290 per year in unnecessary tax payments," he comments.

Mr Elms says Britons can save tax through a number of simple measures, such as setting up an individual savings account, planning their inheritance and filing their self-assessment tax returns on time.

Figures show that £460 million is wasted by business owners filing their returns late and incurring unnecessary penalties.

Mr Elms also recommends that parents set up child trust funds if their kids are eligible - and points out that £242 million could be saved in tax by parents who do so.

All families with children born between September 1st 2002 and April 5th 2005 are entitled to open a child trust fund account.

For more Tax Savings advice click here