The tax education gap: Majority of the UK don’t understand personal tax

• New research reveals a lack of understanding around personal tax affairs, particularly among younger generations;
• Three quarters of those surveyed said there should be more tax education offered in schools;
• Link found between understanding of the tax system and attitudes towards it.

People in the UK do not understand personal tax affairs, with young people the least knowledgeable, according to new research by Deloitte.

Over 2,000 people across the UK were asked a series of tax questions and awarded a knowledge score based on their correct responses. The results revealed that the average person in the UK scored only 10.6 out of a possible 30, while almost half of people scored 10 or less.

Age had a significant impact on performance, with 18-24-year-olds achieving the lowest average score of 6.9. Results steadily increased with age, with over 55s achieving the highest average score of 12.3.

The majority of people surveyed (78%) said that in general, people do not know enough about tax. Meanwhile, 76% said that there should be more tax education in schools.

Matt Ellis, managing partner for tax and legal at Deloitte commented: “There is a clear gap in people’s knowledge of everyday tax issues. It’s important that people – especially younger generations entering the workplace for the first time – understand what is deducted from their pay slip and why. Education is essential, and our research shows there is both reason and appetite for this to begin at school.”

Pressure points

People performed strongly when asked whether additional sources of income are taxable. A high percentage knew that tax is paid on income (over a threshold) from letting out a second property to holidaymakers, and advertising income made by an influencer on Instagram (79%, 61% respectively). The majority also knew that no tax was due on low income from items sold on eBay and not at all on lottery winnings (71%, 66%).

However, people struggled when asked about issues such as tax codes and rates. Less than a fifth (19%) knew what the top rate of income tax in the UK (or Scotland) was, and almost half (46%) were unable to identify that a tax code of 1250L corresponds to an annual allowance of £12,500.

Gift Aid was another area where people struggled. Nearly a third (32%) were unaware that a Gift Aid confirmation enables a charity to claim 25p back in tax for every £1 donated. Furthermore, only 16% of those earning £50,000 or more understood that they could claim back a further 25p in tax for every £1 donated to a charity.

Daniel Lyons, head of tax policy at Deloitte, commented: “It is vital that people are aware of tax and their obligations. Understanding your tax code means you can ensure you are paying the right amount of tax, while a lack of understanding around Gift Aid may mean a proportion of tax relief on payments made to charity could go unclaimed.”

Linking tax education and attitude

The research also showed that understanding tax is likely to influence people’s attitudes towards it. Currently, only 19% feel the tax system is fair.

However, the analysis showed that the more respondents knew, the more likely they were to say that the UK tax system is fair. Among those achieving a score of 10 or less, only 13% thought the system was fair or very fair. However, of those scoring 15 or over, 28% thought the system was fair or very fair. Those who achieved a higher tax score were also less likely to want to cut taxes.

Daniel Lyons added: “These results show a clear interaction between understanding and perceptions of fairness. Educating people on tax affairs could help to inform both people and policy. In order to ensure a UK tax system in which people are satisfied with how much they pay and why, education is key.”

End

Note to editors

About the Tax Education Gap
In partnership with YouGov, Deloitte designed and commissioned a nationally representative survey of 2,119 of adults aged 18+ from across the UK. The survey carried out by YouGov captures levels of tax knowledge, interactions with the tax system and attitudes to taxation. Tax education scores and further modelling were calculated and designed by Deloitte. Please see www.deloitte.co.uk/tax for a detailed description of the research and methods used.

Deloitte’s work with TaxAid and Tax Help for Older People
TaxAid and Tax Help for Older People support 20,000 people on low incomes with their tax problems each year. Using our professional skills and experience, we are working to help the charities with their main challenge of limited resources. We have provided them with teams of volunteers, a rolling secondee to manage and improve the volunteering programme, answer helpline calls and support the charities’ Advice Director, and have promoted their work to the wider profession.

During FY19, Deloitte helped the charities through pro bono support and fundraising at events. From FY20, TaxAid and Tax Help for Older People become charity partners for UK Tax & Legal so we will be able to raise even more money to help the charities reach their goals.

About Deloitte
In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.

Please see deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte LLP is a subsidiary of Deloitte NWE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.

The information contained in this press release is correct at the time of going to press.

For more information, please visit www.deloitte.co.uk

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