Consumer group Which? quizzed more than 4,000 people and found that many did not know the tax-free allowance for income or ISAs, or the fine they could face for missing the looming tax return deadline.

Over half of those surveyed believed they could earn up to £13,850 without paying tax – when in fact the tax-free allowance for 2017/18 was just £11,500.

Around two-thirds did not know how much you are allowed to pay into an ISA each year, even though millions in the UK own one. Some 68% said the ISA limit was £25,000 or were unsure of the exact amount, while just 32% knew that it was in fact £20,000.

Another 69% did not realise tax needs to be paid on income or capital gains from all digital currencies including bitcoin.

The research comes just two-and-a-half weeks before the 31 January self-assessment tax return deadline. People who miss the deadline could face an initial £100 fine.

Gareth Shaw, head of money at Which?, said: “There are clear gaps in the nation’s knowledge of the tax system – with many people not even aware of the basic tax-free allowance.

“As many tackle their tax returns in the coming days, a clear understanding of the tax system will be invaluable and help thousands avoid mistakes, which could prove costly.”

Top Tips for Managing Your Tax Returns

• You must return the self-assessment form, even if you don’t owe any tax.
• It takes time to enroll, especially if online (up to 10 days) so don’t put it off until close to the deadline, as you may find you are too late and face a £100 fine.
• Make sure you have all your paperwork. Bank statements, bank interest certificates, and invoices and receipts if you are self-employed.
• Be accurate and keep a copy – make sure all the information you’ve included is correct and keep your own copy of the form, just in case HMRC come back to you with any questions.
• Make sure you know how you are going to pay – HMRC no longer accepts payment for tax returns via personal credit card. If you can’t afford to pay from just one account, consider transferring money across accounts.

Click here to find out if YOU need to file a tax return.