Consumer confusion about tax return expenses

23 January 2020

One in three people who do their own tax return could be paying more tax than they need to or risking a fine from HMRC because they don’t understand expenses, according to Which?


The consumer champion surveyed nearly 1,300 Which? members about their experiences of submitting a tax return.

Of those who submitted a return, only four in 10 (39%) said they normally claimed expenses – meaning many could be missing out on expense claims that could help them save on their tax bill.

One in 10 (9%) felt their expenses were negligible, while half (49%) of those surveyed believed that they did not have expenses they could claim for. However, when presented with a list of potential claims that could be expensed, more than three in 10 (31%) said they didn’t know which could be claimed.

Those omitting expenses risk overpaying their tax bill. However, trying to claim for expenses that are not eligible for tax relief could potentially result in a fine from HMRC.

HMRC penalties

A penalty charge from HMRC is based on the amount of tax owed, as well as whether HMRC believes the person submitting the return has just been careless, or if they intentionally tried to claim tax relief they are not entitled to.

Among the responses illustrating the confusion, one person told Which?: “I just claim £104 – £2 a week. Someone told me the Inland Revenue just accepts a small amount like this without having to show your expenses. Don’t know if that’s true.”

Receipts and expenses

More than nine in 10 (93%) of those surveyed said that HMRC had never asked for additional information regarding their expenses claims.

However, Which? says you should keep a record of all your receipts and expenses in case you are asked for proof. One respondent to the Which? survey said HMRC requested seven years of all their income and expenses, while another said they were asked for a complete review, which took months to finish.

Gaps in tax knowledge

Last year, Which? revealed a number of gaps in consumers’ tax knowledge, with just over half of adults unaware of how much money can be earned tax-free.

Which? Money editor Jenny Ross says: “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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