‘Worrying gaps’ in tax knowledge uncovered by survey

THERE are “worrying” gaps in consumer knowledge about tax perks and penalties, charities have warned, in the wake of findings in a new survey.

A quiz from consumer group Which? found that more than half of the 4,500 respondents were unaware of how much money could be earned tax free.

The so-called “Great British tax quiz” asked questions over Isas, allowances and tax returns.

Just over half of respondents were wrong in their answers about allowances, believing that a person could earn up to £13,850 without paying any tax in the 2017-18 year. The correct sum is £11,500.

And despite Isas being a popular place for people to hold their cash, it found that many people were unaware of the annual limit for the amount of money that can be put in these savings accounts.

When asked if a person is allowed to pay £25,000 into an Isa each year, two-thirds of respondents said they thought the statement was true or did not know, despite millions owning an Isa account in the UK.

Just a third of people correctly identified this statement as false – as the annual tax-free allowance for Isas is £20,000.

The findings were released ahead of the upcoming self-assessment tax return deadline, which is January 31.

Taxpayers who this applies to must get their returns in by this date, and pay any tax owed, or else face potential fines starting at £100.

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.”