Billions of pounds which could help people across the UK tackle rising living costs is currently going unclaimed as a result of several underused tax breaks, AJ Bell has revealed.

The investment platform highlighted that parents with young children, married couples and retired households could all be missing out.

AJ Bell has urged households to take advantage of any underused tax breaks, as the UK economy continues to face record levels of inflation. Wednesday’s inflation figure from the Office for National Statistics (ONS) for July is expected to reveal even higher price rises than last month, while the Bank of England is now forecasting high inflation beyond the end of the year and into 2023.

Furthermore, the forthcoming energy price cap increase is now predicted to mean average energy bills will rise to around £5,000 a year.

Underused tax perks are available to both working and retired households, including low-income and middle-income individuals and couples.

This include tax free childcare worth £2,000 per child per year. AJ Bell highlighted figures that show during the 2021/22 financial year, 512,415 families used tax free childcare accounts in order to get money off their childcare costs. However, while the government has heralded this as a success, there are still almost 800,000 families who are eligible for the scheme but aren’t using the government handout, meaning the perk is grossly underused. AJ Bell estimates there is an estimated £3bn worth of this support currently going unclaimed.

Another underused tax cited by AJ Bell was Pension Credit, with an estimated 850,000 eligible claimants failing to take-up their Pension Credit payments. These are available to individuals with less than £182.50 a week income and couples with less than £278.70. In total, AJ Bell believes that a potential £1.7bn is going unclaimed each year

AJ Bell also highlighted marriage allowance as another underused tax, which can be used by married couples where one partner is not earning or works part-time and receives a salary below the personal allowance of £12,570. The allowance could be worth £252 a year and also be far more lucrative because claims can be backdated, meaning some couples could be in line for a £1,242 windfall.

“The tax system has become more and more complex over the years, making it a herculean task for people to navigate and be aware of the tax breaks and allowances they are entitled to,” said AJ Bell head of personal finance, Laura Suter.

“It means many are missing out on thousands of pounds of extra income or support each year – which at the moment could be the difference between surviving price rises and going into debt.

“The current government is focused on making more changes to the tax system and unveiling new schemes to help households, but if they put a similar effort into publicising the existing tax breaks and additional support available to people a lot of households would be far better off – and more able to navigate the current cost of living crunch.”

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