Tax returnBritain's tax system is unbelievably, amazingly, fantastically complicated. As proof, the 'Red Book 2011/12' guide to UK taxes is over 10,000 pages long and spread across six volumes and one index volume.

Of course, we are all familiar with the big, well-known taxes that gobble up lots of our money, such as income tax, National Insurance and VAT (Value Added Tax). Together, these three headline taxes will generate almost £350 billion of expected government takings of £577 billion this tax year.

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However, there are hundreds of lesser-known taxes that go towards the enormous cost of this country. Here are 10 of these sneaky 'stealth' taxes that, together, take tens of billions of pounds from our pockets each year. I have listed these taxes from largest to smallest, based on projections for the 2011/12 tax year from the Institute for Fiscal Studies.

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1. Fuel duty

Of all the UK's stealth taxes, fuel duty (on petrol and diesel) is the largest. This tax on driving is expected to raise £29.8 billion. A litre of diesel costing 145p at the pump includes about 87p of taxes, or 60% of its total cost. What's more, fuel duty is to rise in August by 3.02p per litre. Ouch!

2. Alcohol duty

In Britain, we pay alcohol duty on spirits, wine, beer and cider -- the stronger the drink, the higher the tax. For the strongest spirits (those above 40% alcohol by volume), most of the retail price consists of duty. Alcohol duties come to £9.4 billion.

3. Stamp duty

Stamp Duty Land Tax (SDLT) is charged on UK property and land transactions. It is paid by the buyer, and ranges from 0% on properties sold for up to £125,000 (£250,000 for first-time buyers before 25 March) to 5% on sales valued above £1 million. Also, there is stamp duty of 0.5% levied on shares and securities bought via the stock market or stock brokers.
Together, these two duties bring in £9.1 billion.

4. Tobacco duty

Thanks to three separate taxes on tobacco, duties account for five-sixths (83%) of the retail price of a pack of 20 cigarettes. In other words, a pack of coffin nails costing £7.20 includes £6 of tobacco duty and VAT. Tobacco duties will raise £8.4 billion.

5. Vehicle Excise Duty

Since April 2010, the cost of Vehicle Excise Duty ('road tax') for new cars is based on CO2 emissions and fuel type. The least-polluting vehicles pay no VED, but cars in the top band pay £1,000 a year. VED is forecast to be £6.6 billion.

6. Air Passenger Duty

Air Passenger Duty (APD) is a duty charged on passengers flying from UK airports. There are eight different bands of APD, based on four destination bands and economy and premium class. These rates of APD vary from £24 per person to as much as £170 for long-haul flights. APD will raise £2.8 billion.

7. Insurance Premium Tax

Insurance Premium Tax (IPT) is a tax on general insurance premiums, but not life insurance premiums. The standard rate is 6%, but there is a higher rate of 20% for travel insurance and some extended warranties. IPT will contribute £2.7 billion to the government's coffers in 2011/12.

8. Capital Gains Tax

When you make profits from selling shares, property (not your family home) and other assets, you may have to pay Capital Gains Tax (CGT) on these gains. However, each adult has a yearly tax-free CGT allowance (currently £10,600) so most Brits don't pay CGT. Even so, it is expected to raise around £2.2 billion.

9. The National Lottery

The National Lottery has frequently been described as 'a tax on people who are bad at maths'. This is because it pays out only 50p in prizes for every £1 staked. What's more, 12% of lottery revenues go to HM Treasury, which pocketed nearly £700 million from Camelot in 2010/11. Adding in another £1.5 billion of other betting and gaming duties gives total gambling taxes of £2.2 billion.

10. Inheritance Tax

Inheritance tax (IHT) is charged at 40% of the value of your estate at the time of your death. However, the first £325,000 of your estate is taxed at 0%, with this nil-rate band doubled to £650,000 for married couples and same-sex Civil Partners. Although there are dozens of legal ways to dodge IHT, it will still raise £1.9 billion.

Our £75 billion bill

In total, these 10 stealth taxes add up to a whopping £75.1 billion this tax year. This comes to nearly £2,900 for each of the UK's 26 million households. Furthermore, these 10 hidden taxes account for more than an eighth (13%) of total government revenues in 2011/12.
Finally, stealth taxes -- especially those on spending -- are regarded as 'regressive'. This means that they often hit the poorest members of society hardest. Even so, politicians seem to favour ever-higher 'sin taxes', so we should expect duties on drinking, smoking, gambling, driving and flying to keep rising steeply!

Five biggest taxpayer stings

  • 1. HMRC vs Vodafone
    <p> Most recently HM Revenue &amp; Customs let Vodafone off the hook - for quite a sum. Vodafone paid out just &pound;1.25 billion despite an original tax bill being closer to &pound;8 billion (HMRC has always refused to reveal how much it thought the Vodafone final bill was). The episode was made even more shaming and painful because Vodafone was given several years to come good with the cash owed - even though it was sitting on a substantial cash pile at the time.</p>
    1. HMRC vs Vodafone
  • 2. HMRC vs Goldman Sachs
    <p> The Exchequer is estimated to have lost around &pound;10 million to Goldman Sachs recently through an 'error' made by HMRC. The episode relates to an employee benefit trust run by Goldman allowing employees to take non-repayable loans that had no National Insurance contributions tied to them. HMRC <em>did</em> claw back the full amount from more than 20 businesses - but not Goldman. HMRC remains cagey about the details of the deal. Little HMRC accountability or transparency.</p>
    2. HMRC vs Goldman Sachs
  • 3. Taxpayer vs Carlyle Group - QinetiQ
    <p> Huge problems with QinetiQ, the former Defence Evaluation and Research Agency, or DERA. A lack of clarity on contractual arrangements at the outset didn't help, allowing private equity company Carlyle to hammer the price down (why would you start negotiations when you didn't know the company's true value?). The Ministry of Defence behaved, it was said, like &quot;an innocent at a table of card-sharps&quot;. Estimated cost to the taxpayer - &pound;90 million. Huge sums were later made by QinetiQ management when the company listed.</p>
    3. Taxpayer vs Carlyle Group - QinetiQ
  • 4. Taxpayer vs NHS Management
    <p> The TaxPayers' Alliances estimates &pound;2.7bn worth of taxpayer cash was wasted with a super-expensive 'National Programme for IT in the NHS'. The Department of Health, in the end, had very little to show for it as a consequence. Another example of poor management and a seemingly ingrained inability to provide taxpayers' with value for money.</p> <p> <br /> &quot;BT is paid &pound;9 million to implement systems at each NHS site, even though the same systems have been purchased for under &pound;2 million by NHS organisations outside the Programme&quot;, the Commons Public Accounts Committee noted.</p>
    4. Taxpayer vs NHS Management
  • 5. Taxpayer vs public sector productivity
    <p> Contentious. The Office for National Statistics estimated this has declined 3.4% since 1997, &quot;with inputs increasing by 38%.&quot; The Centre for Economics and Business Research estimate that this inefficiency costs the taxpayer &pound;58.4 billion a year.</p> <p> Given the above record, are there any deals that the taxpayer has actually won out on? Not many, but the one successful project was the roll out of new Jobcentre Plus offices. It came in &pound;314 million under budget, claims the Taxpayers' Alliance. A small cheer.</p>
    5. Taxpayer vs public sector productivity