A few years ago HMRC’s adverts contained the message “tax doesn’t have to be taxing”. Many have questioned that statement since and now HMRC has commissioned its own research!
HMRC is attempting to gain an understanding of taxpayers’ experience of the PAYE process in particular.
The research, “PAYE online: PAYE and NI in a digital age”, found that individual knowledge of how tax works is limited. Although there is basic knowledge, few fully understand how their tax is calculated, what would make it change and how it would change.
Furthermore, individuals fail to engage with their personal tax position. Those taxed at source under PAYE typically see it as something dealt with by their employer or pension provider and, as a result, feel no need to get involved. They do not generally recognise their role and responsibilities in managing their own tax liabilities. Indeed, if a tax issue arose, they felt it was the responsibility of someone else, e.g. HMRC or their employer, to manage it.
In addition, the results show that taxpayers do not feel able to deal with any tax issues that arise. They are confused by having responsibility for something in which they are not directly involved and do not fully understand.
To tax professionals, the findings come as no surprise. HMRC’s recent sweep through PAYE records to find underpayments of tax for past years in order to raise revenue has led to many more taxpayers seeking advice on where these ‘surprises’ have come from.
Other than taxpayers needing professional advice to check their tax affairs, what can be done? One suggestion is an online tax account and this seemed to appeal to taxpayers surveyed. They would welcome the reassurance that easy access to this information would bring and regard online as the natural platform for this. Individuals have a clear idea of what they want from an online tax account, particularly: education about their tax and how tax works, a facility to check their details, and the opportunity to interact with HMRC digitally.
HMRC concluded from the research that the online tax account has the potential to help create transparency in the personal tax system. It could also provide the means for individuals to feel more able to take responsibility for their personal tax.
HMRC’s conclusions may be right for some, but I suspect that, for most, tax will remain just as taxing!