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17 March 2010
of North West in the dark about how much tax they are really paying
OVER 4 in 5
adults in the North West are unsure of the impact of indirect taxes
such as VAT and council tax on their wage packet, according to a
survey commissioned by ACCA (The Association of Chartered Certified
Accountants). 21% of respondents to a poll of 220 adults in the
North West, as part of a UK wide poll of 2085 adults, were aware
that an additional 22% of the average salary is spent on other taxes
after income tax has been deducted.
The poll, conducted by YouGov, also revealed widespread confusion
about how much income tax employees should be paying. 82% of
respondents were unable to correctly identify what income tax levels
were paid on all three salaries of £20,000, £50,000 and £200,000.
Chas Roy-Chowdhury, head of taxation at ACCA, said:- “We all
know that paying some form of tax is a certainty of life, but it is
alarming that as a nation we know so little about something that
most of us regard as so important. Most of us just assume that we
don’t need to understand it – we just have to pay it. But as the
recent administrative issues with HM Revenue & Customs (HMRC)
reveal, we can’t just assume we are paying the right rate of tax and
it is up to us to make sure that we are.”
Other highlights of the survey results include:-
There is confusion about the everyday items VAT applies to – 72% did
not know that Jaffa Cakes are VAT exempt
► 85% didn’t know that
up to £325,000 could be gifted tax free to their dependents
► Less than half (46%)
of adults in the North West who have worked have checked their tax
code with HMRC, despite the recent issues with coding which revealed
that thousands were paying too much and too little tax
► Only 15% could
correctly identify the age of state retirement for both men and
women would be 66 in 2020
Roy-Chowdhury continued:- “Although we can’t necessarily
control the amount of income tax we pay, I think many people would
be surprised at the amount they can save just by understanding the
tax system better and applying that knowledge to their everyday
lives. Our guide is designed to help them do just that and hopefully
to reduce their tax burden. For example, while there is a lot of
government hype around the benefits of electric cars, from a tax
perspective the train is actually a much more economical way to
The ACCA guide on managing your tax bill entitled, “Axe your tax
bill” gives advice on how everyone from first time employees to
pensioners can make tax reductions on items they frequently use and
purchase, as well as make small lifestyle changes to bring down
their tax outlay. It is available to download at ACCA’s
for a limited period.
Individuals are being urged to make donations now to avoid charities
GIFT Aid is
one of the easiest ways to make a donation tax effective. The
charity reclaims the basic rate tax from the Inland Revenue. There
is no extra cost to the donor.
According to Helen Besant-Roberts, a partner at accountancy firm,
Hurst, who advises charities across the UK, a personal donation of
£5000 made now will lose out on £160 if it is made after April 5.
This means charities should actively be contacting donors requesting
they bring forward any pending donations.
Besant-Roberts said:- “This is a vital tax break for
charities. All charities will be affected especially at a time when
charities are being hit from all angles with rising costs,
government spending cuts, the VAT rise, and people giving less in a
difficult economic climate.
In particular many smaller, local charities are going to suffer.
Many have been forced to reduce resources and are less likely to
have sophisticated systems in place.“
In 2008 the basic rate of income tax was reduced from 22% to 20%,
resulting in charities receiving a reduction in the amount of Gift
Aid that could be claimed back. To soften the blow, the Government
introduced a delay in its effects and Gift Aid transitional relief
was introduced for three years, which is now coming to an end.
According to Besant-Roberts, charities like Wood Street Mission, a
charity which supports families in the Manchester and Salford areas,
are expected to significantly suffer. Wood Street Mission receives
approximately £130k in donations a year and could face lost income
of over £4k with the withdrawal of Gift Aid transitional relief.
The Gift Aid transitional relief knock back comes at a time when
children’s charities in the area need more support than ever. A Save
the Children report recently highlighted the issue with Manchester
having the highest levels of child poverty in the UK.
Jan O’Connor said on behalf of Wood Street Mission:- “This
will be a huge disadvantage. Small businesses can claim VAT back but
charities like us can’t. Having Gift Aid relief softened this blow
but now we’re losing this too. We don’t know if it’s going to be
replaced in the future.
Demand for our service is increasing and yet the cash coming in is
reducing. We need all the help we can get from our donors and if
they can bring donations forward it will be of great benefit to us
and the children we help.”
Hurst advises a number of charities including: Wood Street Mission,
Manchester Art Gallery, Independent Options, and Crossroads Caring
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