Millions in the dark over tax-free allowance, what we’re getting wrong
Most people don’t know how much money can earn before tax kicks in, a new study found.
And that’s just one of the results of a new study by consumer group Which?
"There are clear gaps in the nation’s knowledge of the tax system – with many people not even aware of the basic tax-free allowance," Gareth Shaw, head of money at Which?, said.
The consumer group found a series of "worrying gaps" in people’s knowledge when it decided to go out and test the nation with its Great British tax quiz .
More than 4,500 people took the quiz – which asked people if statements were true or false – most of them got the question about tax free allowances wrong.
The facts about tax people don’t know
When Which? asked if a person could earn up to £13,850 without paying any tax in the 2017-18 tax year, more than half (51%) believed this statement to be correct or did not know.
But the actual tax-free allowance for 2017-18 was £11,500.
Turning to savings, more than two people in three thought you could save £25,000 into an ISA each year. The annual tax-free allowance for ISAs is actually £20,000.
Some 54% of people didn’t know if you had to pay tax on bitcoin profits – with fewer than one in three correctly saying you do.
Half the people questioned didn’t know that you can make £7,500 a year from renting a spare room without being taxed.
"As many tackle their tax returns in the coming days, a clear understanding of the tax system will be invaluable and help thousands avoid mistakes, which could prove costly," Shaw said.
"Take time to brush up on the basics, and consider using online tools that will help to demystify the jargon and reduce stress."
You can try the quiz yourself here.
Everything you need to know about tax returns
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