Consumer confusion around tax return expenses claims, warns Which?

Almost a third of people who do their own tax return could be paying more tax than they need to or risking a hefty fine from HMRC because they do not know what can be claimed, according to a Which? member survey.

The consumer champion surveyed nearly 1,300 Which? members about their experiences of submitting a tax return. Of those who told Which? that they submit a self-assessment tax return, only four in 10 (39%) said they normally claim expenses – meaning many could be missing out on expense claims that could help them save on their tax bill.

One in 10 (9%) felt their expenses were negligible, while half (49%) of those surveyed believed that they did not have expenses they could claim for. However, when presented with a list of potential claims that could be expensed, more than three in 10 (31%) said they didn’t know which could be claimed in a tax return.

Those submitting a tax return who do not include expenses as a result of not knowing what they can claim for risk overpaying their tax bill. However, trying to claim for expenses that are not eligible for tax relief could potentially result in a fine from HMRC.

The penalty is based on the amount of tax owed, and the severity of the charge depends on whether HMRC believes the person submitting the return has just been careless, or if they have intentionally tried to claim for tax relief they are not entitled to.

Among the responses illustrating the confusion, one person told Which?: “I just claim £104 – £2 a week. Someone told me the Inland Revenue just accepts a small amount like this without having to show your expenses. Don’t know if that’s true!”

More than nine in 10 (93%) of those surveyed said that HMRC had never asked for additional information regarding their expenses claims.

However, Which? is reminding people to keep a record of all their receipts and expenses in case they are asked for proof, with one person telling Which? HMRC requested seven years of all income and expenses, and another saying they were asked for a complete review, which took months to finish.

Last year, Which? revealed a number of worrying gaps in consumers’ tax knowledge, with just over half of adults unaware of how much money can be earned tax-free.

Those completing their tax return ahead of the deadline can use Which?’s tax calculator for a simple and quick way to submit their return directly to HMRC.

Jenny Ross, Which? Money Editor, said:

“Few people enjoy the annual ordeal of submitting a tax return, but getting to grips with the rules will help you to avoid paying too much, or being hit with a hefty fine.

“Get organised by keeping hold of all your receipts and reading up on what HMRC considers as reasonable expenses, and think about using an online calculator to simplify the process of submitting your tax return.”

Notes to editors:

Which? surveyed 1,278 members of its online panel in November 2019.

For more information on penalties for mistakes, visit: https://www.which.co.uk/money/tax/income-tax/self-assessment-tax-return/late-tax-returns-and-penalties-for-mistakes-ad7n04l6qd9p

For more information ahead of submitting a tax-return, visit: https://www.which.co.uk/money/tax/income-tax/self-assessment-tax-return

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