Britons will rack up 19 million hours filling in their tax returns this year, Which? has found, as new research from the consumer champion exposes worrying gaps in people’s tax knowledge.
With the 31 January online tax return deadline creeping up, Which? asked 4,000 people about their tax-filing habits and found the average time taken to complete a return is two and a half hours.
The consumer champion found one in five (20%) people managed to complete their return in less than one hour, but one in 10 respondents (9%) said they laboured over the job for more than five hours.
Which?’s survey also exposed worrying gaps in people’s tax knowledge, with only three out of 4,000 people able to answer all seven questions about general tax rules correctly.
Awareness of how children’s savings are taxed was particularly low. When Which? asked if tax is payable on interest earned in children’s savings accounts, only one in six people (17%) knew that this is the case.
There is a £100 rule for interest earned on children’s savings. If parents put money in their child’s savings, and it earns interest of more than £100 in a tax year, all of the interest earned will be added to their savings income and taxed as though they earned it.
The allowance goes up to £200 if both parents put money in a child’s account.
Capital gains tax (CGT) was another area that caused some confusion. While a third of people correctly identified that you don’t have to pay CGT when selling your main home, around a third got the answer wrong and the remaining third said they didn’t know.
Meanwhile, almost half (48%) wrongly thought you don’t have to file a tax return if you are taxed by PAYE.
If you’re employed and the only income you receive is from your job, you won’t have to complete a tax return. But if you also receive rental income, do extra freelance work or make a profit after selling an asset, you will need to declare it on a tax return.
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 for missing the deadline.
Filing late will land taxpayers 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.
Jenny Ross, Which? Money Editor, said:
“Our findings show just how time-consuming and laborious tax returns can be for many, and there are clear gaps in the nation’s knowledge of the tax system.
“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.
“To avoid a late submission and a hefty fine, 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 £46 for non-members.
Which? surveyed 4,000 UK adults between 13th and 19th October 2020. Fieldwork was carried out online by Opinium and data have 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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