Myth-busting – Electrical Safety installations Act 202011:19 AM, 3rd August 2020
About 6 days ago 74
Tax is obviously too taxing for most people as around 1.4 million UK workers have to repay an average of £1,400 each in underpaid tax following errors by HM Revenue & Customs (HMRC).
On top of that, HMRC overcharged another 1 million taxpayers by £238 million last year.
The current tax code problems are not the first disclosed by HMRC this year. In February, thousands of pensioners were issued the wrong tax codes in error following a data transfer within the taxman’s computer system.
The plain truth is it seems neither the taxman or most taxpayers know whether they are paying the right slice of their income because the UK tax system relies on errant computers and is too complicated and involves filling in too many forms.
Landlords and property investors face a confusing time with their tax returns as most do not have a clue as to what they can claim against tax and how to work out their income tax.
Most find capital gains tax an impenetrable nightmare and few understand how to keep the right financial records to back up rental accounts and tax claims.
According to survey results issued by HSBC bank, despite around 5 million taxpayers picking up a refund or bill from HMRC because the incorrect amount of tax is collected through PAYE each year, more than half (54%) of taxpayers do not know their income tax code and a third (36%) have never checked their P60.
Personal income tax allowances and current thresholds for different tax bands are also a mystery for the majority of taxpayers.
More than half (53%) of UK adults do not know the current personal income tax-free allowance (£6,475).
Eight in ten (81%) adults are unsure how much they should earn to pay higher rate income tax at 40% tax, with more than half (55%) believing they had to earn far more than the actual salary threshold.
What categories of income attract tax also confuse most people.
More than half (53%) of adults did not know that income tax is payable on employee benefits and 30% did not know it is payable on pension income. A fifth (20%) did not know that income tax is payable on most savings while a further 1 in 10 incorrectly believed that income tax would be paid on cash ISAs.
David Wells, of HSBC said: “It is important people know their tax code and check it with their P60 each tax year.
“There is always a chance you have overpaid tax, in which case you can reclaim the money.
“Equally, it’s possible you have been given the wrong tax code you could be underpaying and could be faced with a large tax bill at the end of the financial year.
“This research demonstrates the importance of being aware of all aspects of your finances and tax allowances; it is the obvious way to see if you can save money.”
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