You are here: Home - Household Bills - News -

Self-employed most likely to under-report tax

Written by:
Men and the self-employed are more likely to under-report the tax they owe on their tax returns, finds the Institute for Fiscal Studies (IFS).

Around 10 million people file self-assessment tax returns each year, a third of all UK taxpayers. Over a third of those randomly audited by HMRC were found to have errors, leading to an average underpayment of tax of £2,320. This is equivalent to around one-third of the original tax owed. 

Most non-compliant taxpayers (60%) owe less than £1,000. A small number of taxpayers – less than 4% – owe more than £10,000, but they account for 42% of the missing revenue.

Men are more likely to be non-compliant than women (40% versus 27%) and non-compliance is greater among working-age individuals, at around 40% of those below state pension age (SPA), compared with only 21% of individuals above SPA.

The problem of non-compliance is particularly bad among the self-employed, with 59% of taxpayers declaring only self-employment income found to be non-compliant. This may reflect the complexities of declaring self-employment income. Non-compliance is highest in the construction, transport and hospitality industries.

It’s not just the wealthy who misreport their tax – in fact, non-compliance does not vary substantially with income. The cash amount of tax not reported by non-compliant individuals averages around £2,200 across all but the individuals with the top 20% of incomes. For those in the top 20%, with incomes above £47,270, it averages £3,530.

IFS estimated that the cost of an HMRC audit is £2,500, so most do not cover their costs. However, targeted audits can raise more than they cost. The group said audits targeting those with the top 20% of reported incomes would have an average total yield of £10,870 per audit.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week