A worrying tax gap

The tax policies of the main political parties came under the microscope during the general election and were the subject of wide and vigorous debate.

However, while the pundits argued over the fine print it appears that most people still find the whole subject taxing, to say the least.

More than 2,000 people were asked a series of tax questions and awarded a knowledge score based on their correct responses.

Worryingly, the results revealed that the average person in the UK scored only 10.6 out of a possible 30, while almost half of people scored 10 or less.

Age had a significant impact on performance, with 18-24-year-olds achieving the lowest average score of 6.9. Results steadily increased with age, with over 55s achieving the highest average score of 12.3.

People performed strongly when asked whether additional sources of income were taxable.

A high percentage knew that tax is paid on income (over a threshold) from letting out a second property to holidaymakers and advertising income made by an influencer on Instagram.

The majority also knew that no tax was due on low income from items sold on eBay and not at all on lottery winnings.

However, people struggled when asked about issues such as tax codes and rates. Less than a fifth knew what the top rate of income tax was when quizzed for the survey, which was carried out for professional services group Deloitte.

Almost half were unable to identify that a tax code of 1250L corresponds to an annual allowance of £12,500.

Gift Aid was another area where people struggled. Nearly a third of those quizzed were unaware that a Gift Aid confirmation enables a charity to claim 25p back in tax for every £1 that is donated.

Just 16 per cent of those earning £50,000 or more understood that they could claim back a further 25p in tax for every £1 donated to a charity.

So is there an argument for more education – particularly in the classroom – to give young people more of a chance to understand a subject that will be important to them throughout their adult life?

There certainly seems to be an appetite. According to the survey, 76 per cent of those who took part said that there should be more tax education in schools.

This argument for more education in the classroom is compelling. Helping young people understand more about their money and how to manage it should be an essential part of lessons.

Understanding tax can only make life easier. Now really is the time to tackle the ‘Tax Education Gap’.