Britons will have spent 25 million hours filling in their tax returns this year, Which? has found, as its new research reveals that many people will have to dip into their savings to pay the tax they owe or will leave the task to the last minute.
With the 31 January online tax return deadline fast approaching, Which? asked 4,000 people about their tax-filing habits and found the average time taken to complete a return is more than two hours.
The consumer champion found a quarter (25%) of people managed to complete their return in less than one hour, but eight per cent of respondents said they laboured over the job for more than five hours.
It comes as HMRC waived penalties on late tax returns until 28 February 2022 and late tax payments until 1 April 2022. However, Which? warns that self-assessors will still be charged interest if they do not pay their tax bill by 31 January.
When it comes to paying the tax they owe, the survey indicated that while two in five people (38%) have already budgeted for the expense, one in five (22%) were planning to dip into their savings, while another one in five (19%) said they had not thought about it yet.
If you are unable to pay your tax bill, you can set up a Time to Pay arrangement online to split your bill into smaller instalments. One in six people (17%) told Which? they planned to use this arrangement to pay the tax they owe for 2020-21.
Which? also exposed gaps in people’s tax knowledge; as when the respondents were faced with true or false questions about the UK tax system, many either got the answer wrong or said they didn’t know either way.
The consumer champion saw confusion regarding the tax you pay on your state pension. Three in 10 people (31%) wrongly thought Which?’s statement ‘You don’t have to pay tax on the money you receive from your state pension’ was true, and a quarter (27%) didn’t know either way.
The state pension is paid gross, without any tax deducted, and you might have tax to pay if your total income from all sources is greater than your tax-free allowance.
Which? also found that of those who had received a self-employment income support scheme (SEISS) grant during the 2020-21 tax year, one in eight people said they were not aware these grants were taxable and had to be declared on their tax return.
SEISS grants are subject to income tax and self-employed National Insurance, and therefore must be declared as part of your income on your tax return. There’s a specific section for this income, on a page called ‘Other tax adjustments for your business trading name’.
To help people navigate the often lengthy, confusing process of filing a tax return, Which?’s easy-to-use and jargon-free online tax calculator offers personalised tax tips and helps simplify the process. This system allows for returns to be submitted directly to HMRC.
Which? is encouraging people to prepare early to avoid the penalties and added interest for missing the deadline.
Filing late will land you with an immediate £100 fine, and the cost of late returns can reach thousands, depending on how late it is and the amount owed. A return filed three months late could cost £1,000.
While HMRC has waived the 5% late payment fine until 1 April 2022, it will still charge 2.75% interest on unpaid tax from 1 February onwards.
Jenny Ross, Which? Money Editor, said:
“Our research shows that some people spend hours on their tax return, so the sooner you can get started the better.
“While the waiving of penalties for late tax returns came as a relief to the millions of people who are yet to file their returns, you’ll still be charged interest if you don’t pay your bill by 31 January.
“To avoid a late submission and a hefty fine further down the line, we’d recommend using one of the streamlined tools that can guide users through the process quickly with reduced stress.”
Notes to editors
The Which? tax calculator can be found here: https://www.which.co.uk/money/tax-calculator/. Fees apply; £10 for Which? members and £49 for non-members.
Which? surveyed 4,000 adults in the UK between 29th October and 2nd November 2021. Fieldwork was carried out online by Opinium and data has been weighted to be representative of the UK population (aged 18+).
Which? is the UK’s consumer champion, here to make life simpler, fairer and safer for everyone. Our research gets to the heart of consumer issues, our advice is impartial, and our rigorous product tests lead to expert recommendations. We’re the independent consumer voice that influences politicians and lawmakers, investigates, holds businesses to account and makes change happen. As an organisation we’re not for profit and all for making consumers more powerful.
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