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Nearly a third of people paying too much tax

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Via Yahoo Finance

Nearly a third of people who file their own tax return could be paying more than they need to or risking a fine because they are unsure what can be claimed, a new survey by consumer group Which? has found.

One in 10 (9%) felt their expenses were so small they weren’t worth considering, while half (49%) believed that they did not have expenses they could claim for, in the survey of almost 1,300 people. However, when presented with a list of potential items, 31% said they did not know which ones could be claimed for in a tax return.

Not including expenses as a result of not knowing what can claimed for can lead to paying too much tax. On the other hand, trying to claim for expenses that are not eligible for tax relief could potentially result in a hefty fine from HM Revenue and Customs (HMRC).

The fine is based on the amount of tax owed, and the severity of the penalty depends on whether HMRC believes the person submitting the return has just made a mistake, or if they have intentionally tried to claim for tax relief they are not entitled to.

READ MORE: Five ways to make doing your tax return easier

More than nine in 10 (93%) respondents said HMRC had never asked for additional information regarding their expenses claims but Which? is reminding people to keep a record of all their receipts and expenses in case they are asked for proof.

One person told Which? HMRC requested seven years of all income and expenses, and another said they were asked for a complete review, which took months to finish.

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The findings come ahead of the self-assessment tax return deadline on 31 January. The fine for late returns starts at £100 ($130).

In a separate survey last year, Which? found a number of “worrying gaps” in the public’s tax knowledge, with just over half (51%) of adults unaware of how much money can be earned tax-free.

Jenny Ross, Which? money editor, said: “Few people enjoy the annual ordeal of submitting a tax return, but getting to grips with the rules will help you to avoid paying too much, or being hit with a hefty fine.

“Get organised by keeping hold of all your receipts and reading up on what HMRC considers as reasonable expenses, and think about using an online calculator to simplify the process of submitting your tax return.”

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