Brits in the dark about tax allowances
The research also found the majority do not know the tax-free allowances currently available to them on both their incomes and savings. There is also a distinct lack of awareness among lower income earners – the very people these allowances benefit the most.
The survey of 2,000 UK adults found that almost half (47%) of people think it is always compulsory to pay tax on your savings, unaware that if they have not earned more than the annual personal allowance this is not the case. A further 93% of people are unaware that you are able to claim back tax paid on your savings from HMRC in the same way you would claim income tax if eligible.
Almost two-thirds (72%) of people did not know that the current tax-free personal allowance on income for those aged under 65 is £6,475 while 84% were not aware that this allowance is rising to £7,475 from April.
Worryingly this is true of a startling number of people who are earning below the threshold and should not be paying income tax. Almost eight in ten (79%) of those earning less than £5,000 a year and 70% of those earning less than £10,000 a year did not know the current personal allowance – despite being most likely to benefit from it. A further 86% of those earning less than £5K and 91% of those earning less than £10K also did not know what this will allowance will change to in April.
There is also ignorance of the additional allowances available to those aged over 65. Eighty-four per cent of adults did not know that the tax-free personal allowance for those aged between 65 and 74 is £9,490 and 93% did not know that for those aged over 75 this is £9,640.
A further 91% of adults did not know that the tax-free personal allowance for those aged between 65 and 74 rises to £9,940 from April and 92% did not know that for those aged over 75 this will rise to £10,090.
Among those this is most relevant to, 73% of those aged over 55 did not know the tax free allowance for 65-74 year olds and 88% did not know the allowance for over 75s.
Commenting, Richard Brown, head of savings at HSBC, said: “It is essential that we are aware of the tax thresholds as this could make a big difference to the interest we earn on our savings and the tax we pay on our earnings. This is especially true for those on lower incomes or the older generation who could possibly reduce or escape altogether the tax they are currently paying.”