New research has shown that 20 million UK workers do not understand the basics of tax – and more than half of those are self-employed workers such as plumbers and electricians.
The survey – which was carried out by cloud based accountancy firm Boox – found that around 10.9 million people will complete self-assessment tax returns, a higher number than ever before – yet the level of understanding of the tax they are paying remains low.
Thirty-six per cent of UK workers in either full or part-time employment do not understand the current VAT rate, while 59 per cent are not aware of what a salary level must be in order for the 20 per cent tax rate to be payable .
The study also found that just one in 10 people are aware that 12 per cent of their salary goes towards National Insurance Contributions (NIC) for those in Class 1.
The report revealed that more than 1.2 million of the UK’s 4.2 million freelancers are regularly making mistakes on their tax returns, including missing deadlines and then having to fork out for the resulting fines.
Over nine in ten are not aware of the percentage rate of Class 4 NIC that is payable on taxable profit, and 33 per cent of freelancers are not aware of the current VAT rate in the UK.
Phillip Venn, commercial director at Boox, commented: “With this year’s Boox Report we set out to understand the level of understanding British workers, freelancers and the self-employed have when it comes to tax affairs and we’ve uncovered some pretty glaring gaps in knowledge and poor basic practices.
“With more people than ever before required to complete self-assessment and the freelancer market looking buoyant in 2014, it’s vital that we help people understand their tax obligations, and make managing personal finances as straightforward as possible,” added Mr Venn.