BRITONS do not know how much they’re paying in tax according to new research, with savers being at risk of paying more than necessary.
Only 48 percent of people say they know how much tax they pay, but even then, huge confusion around taxes means many will be way off the mark. Women, the squeezed middle (aged 35-54) and renters are the least likely to know what they’re paying in tax, Hargreaves Lansdown found.
Worryingly, the less people earn, the less likely they are to be aware of what they’re paying in tax.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, has explained how people can reduce their income tax and National Insurance bills.
Ms Coles warned savers could be caught out further in the coming months as HMRC aims to balance the books following the pandemic.
“Most of us don’t know how much tax we pay, so we risk paying over the odds,” she said.
“And at a time when the Government is keen to claw back as much money as possible to meet the astonishing costs of the pandemic, if we don’t get on top of our tax bill, there’s every chance we’ll be caught out by tax hikes too.
“It’s hardly surprising we don’t know exactly how much tax we’re paying, because the tax system is so needlessly complex. However, being completely in the dark about tax is dangerous, because we may not budget effectively for tax bills, and we run the risk of paying more than our fair share.”
Ms Coles went on to explain how the complicated tax system is largely to blame for keeping confused.
“The tax system almost seems to have been designed to bamboozle,” she said.
“Take VAT, for example, essential foods are VAT-free, and luxuries face VAT, but it’s almost impossible to guess where the line is drawn. So, for example, potato crisps are taxed at 20 percent, but there’s no VAT on vegetable crisps, and tortilla chips are zero rated too.
“And even when we think we know how much tax we’re paying, there’s a good chance we’re actually in the dark. Take income tax: even if you know the top rate of tax you pay, it isn’t the same as knowing how much tax you pay overall, because you face a different rate on each slice of your income.. “Brinkwire Summary News”.