Few people understand tax and how the rules impact the money in their pockets, according to new research.
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Out of 2,000 people quizzed about tax, the average score out of 30 was just 10.6 – while half of those taking the quiz scored less than 10.
The lowest scores came from the youngest people asked to take part.
Young adults aged 18 to 24 years old averaged a score of just 6.9 out of 30, while over 55s did best with an average 12.3 points.
Most people knew they should pay tax on renting out a holiday home (79%) and advertising income from acting as an influencer on Instagram (61%), while 66% understood lottery winnings are tax-free.
Lack of understanding
But most struggled when asked about tax codes and rates.
Only one in five could name the top rate of tax, while half could not explain a tax code of 1250L corresponds to a personal annual income tax allowance of £12,500 a year.
Giving money to charity was another grey tax area.
Only 32% of people asked knew Gift Aid lets charities reclaim 25p in tax for every £1 donated, while just 16% of high earners paying income tax at a 40% rate realised their Gift Aid claims doubled to 50p in a pound.
Daniel Lyons, head of tax policy at Deloitte, said: “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.”
Tax education needed
The research also concluded that understanding tax influenced how taxpayers felt about paying their liabilities.
Just 19% felt the tax system was fair, but the more people knew about tax, the more likely they were to believe the system was fair.
“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,” said Lyons.
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