Following the news that over a million taxpayers were overcharged last year by HM Revenue and Customs, which collected £238 million too much tax, there exists widespread ignorance and apathy about income tax among UK taxpayers, according to research from
HSBC.
The survey of 2,100 UK adults reveals taxpayers are failing to check their income tax deductions.
Despite around five million taxpayers receiving a repayment or a bill from HM Revenue & Customs because the incorrect amount of tax is collected through PAYE each year, the research reveals that more than half (54 per cent) of Britons do not know their income tax code and more worrying a third (36 per cent) 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.
Eight in ten (81 per cent) adults did not know at what level of earnings 40 per cent tax applied, with more than half (55 per cent) believing they had to earn far more than the actual salary threshold.
In addition, more than half (53 per cent) of UK adults did not know the current personal income tax-free allowance (£6,475).
Confusion is also rife when it comes to what income tax is paid on. More than half (53 per cent) of adults did not know that income tax is payable on employee benefits and 30 per cent did not know it is payable on pension income.
In addition, one in five (20 per cent) did not know that income tax is payable on most savings while a further one in 10 incorrectly believed that income tax would be paid on cash ISAs.
Surprisingly, it is those in full-time employment who are least likely to check whether they are paying the correct amount of tax, says HSBC.
Just half of those in full time employment know their income tax code. This falls to 43 per cent of part-time workers working between 8-29 hours a week and just 39 per cent of part-time workers working less than 8 hours a week.
However, while some may not be as aware of their tax code, part time workers working less than eight hours a week are most likely to check their P60, with two thirds (66 per cent) having checked these in the past.
Men (51 per cent) are slightly more likely than women (43 per cent) to know their income tax code and also more likely to check their P60 (63 per cent vs. 51 per cent).
Men are also more likely than women to know the correct personal income tax allowance (51 per cent vs. 44 per cent) and the correct threshold for 40 per cent tax (23 per cent vs. 15 per cent).
"It is important that people know their tax code and check it with their P60 each tax year,” said David Wells, Head of Pensions, Savings and Investments at HSBC.
“Whether you are in full or part time employment, there is always a chance you have been overpaying in which case you can reclaim the tax. There is equally the possibility that if 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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