Lack of tax awareness contributing to billions in errors
Billions of pounds could be lost each year to taxpayers making errors in their returns due to a lack of public knowledge and awareness of tax, warns the Association of Taxation Technicians.
Launching Tax Awareness Week, the Association has cautioned that confusion over tax rules and the complexity of the UK tax system are contributing to mistakes when filling out returns. The latest tax gap statistics from HMRC1 show that £7.1 billion a year is lost to error, with a further £14.6 billion lost to failure to take reasonable care.
Data suggests misunderstanding of tax rules is widespread. Research conducted by Tax Policy Associates in July 20242 showed that half of the British public thought that, once you reach the income tax higher rate threshold, the 40% higher rate applies to all of your earnings.
The more complicated the tax rules get, the less they are understood – research carried out by the Chartered Institute of Taxation (CIOT) in 20233 showed that only one in five Scottish taxpayers correctly identified that income tax is a shared responsibility of the Scottish and UK parliaments.
Emma Rawson, ATT Director of Public Policy, said:
“While the reasons for these errors and failures will be manifold, it’s not unreasonable to suppose that general lack of awareness of the tax rules is a contributory factor.
“This lack of understanding makes it hard for people to know whether their tax position is correct. This can lead to errors, costly mistakes, and stress if HMRC do get in touch. Plus, the anxiety around getting things right can itself become a barrier to taking steps towards compliance.”
Tax Awareness Week, a joint initiative of the ATT and CIOT, runs from March 9 to 13 and is an educational initiative designed to increase public understanding of tax obligations, benefits, and resources. Each day has a different theme addressing a specific aspect the work done to promote awareness, compliance, and proactive engagement among individuals and businesses.
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