You may think you know only too much about tax. However, a new survey by consumer advice brand Which? Has found great gaps in the UK’s knowledge on tax, including how much can be earned tax-free.
The quiz that surveyed 4572 UK adults using true or false questions revealed that more than half (51%) of respondents thought the personal tax-free allowance of the 2017 – 18 tax year was £13,850 rather than the actual £11,500, or said they did not know.
Some 68% of respondents asked if you are allowed to pay £25,000 into an ISA each year thought the statement was true or did not know. Only a third correctly identified the false figure when the ISA allowance is £20,000.
Income and capital gains from cryptocurrencies like Bitcoin also caused confusion with 69% saying they either did not know or thought tax did not have to be paid.
While tax is confusing with a vast expanse of rules changing regularly, not to mention the clunky online portal for self assessment failing to deliver a smooth user experience, such a wide lack of awareness is symptomatic of a lack of understanding about personal finance.
Many of these questions may seem pedantic in their precise quoting of figures when many of us are either employed and do not have extra income, but not knowing the system can be costly. In fact it is those of us who just scrape the line who are arguably the most at risk if we are earning enough but can’t justify forking out for a tax accountant.
Part of Emerald’s mission in financial services is to empower more people to take control of their financial futures. For instance, financial issues affecting women including pension gaps and the rising numbers of divorces later in life are examples of where more and more people are having to independently manage their finances.
The deadline to submit tax returns is 31 January 2019 and late submission can incur a fine starting from £100. Yet in the quiz, more than half (51%) believed a person could only be fined £50 for late submission and only a fifth (21%) correctly identified this statement to be false.
Gareth Shaw, Head of Money at Which?, said:
“There are clear gaps in the nation’s knowledge of the tax system – with many people not even aware of the basic tax-free allowance.
“As many tackle their tax returns in the coming days, a clear understanding of the tax system will be invaluable and help thousands avoid mistakes, which could prove costly.
“Take time to brush up on the basics, and consider using online tools that will help to demystify the jargon and reduce stress.”
Tax is one of life’s unavoidable costs. However, other unavoidable financial challenges in life may be controlled through insurance. Our insurance products could help with unforeseen costs thrown at you and give you more security that your finances are safe.