Britain labelled nation of tax illiterates

New research from Fidelity International has highlighter a poor level of understanding of tax matters among Britons, which could result in savers needlessly wasting millions of pounds

The research which suggests that 33 million UK tax payers are confused about tax, was conducted in support of Fidelity’s ‘Know Your Tax’ campaign, launched to help people understand their taxes and make their savings more tax efficient. The report.

According to the report, 15% UK taxpayers admit they don’t even know which tax band they are currently in. And there seems to be even more confusion amongst those that claim to know – with over a quarter (26%) of people with taxable income in excess of £50,000 thinking they only pay a basic rate (20%) of tax.

The report also highlights the fact that 38% of those surveyed have yet to take any action to make themselves more tax efficient, with a quarter of the belief there is nothing they can do to reduce their tax liability.

Over the coming weeks, Fidelity has announced that it will look in more detail at the different savings tax breaks available, increasing the nation’s knowledge of how they are taxed and to help educate Britons to better shelter their savings from the tax man.

Paul Kennedy, Head of Tax and Trust Planning at Fidelity International, said:

“You might ask why people need to understand their tax position? Well, just as the Government takes a slice of your earnings in tax so too does it take a slice of the returns you make on savings and investments. By planning our savings and investment wisely, we can make them more tax efficient. Tax efficient, simply means arranging things in a way so that we keep the tax on our savings and investments to a minimum…and that means more for us and less for the taxman.”

“We believe everyone should have some level of understanding about their own position otherwise; they could be throwing money away. There are a number of steps people can take and we hope to help Britons better understand how to invest wisely.”

The report points out that by taking simple steps like sheltering savings in a tax efficient wrapper like an Individual Savings Account (ISA), making regular pensions contributions and making the most of capital gains tax allowances, people in all tax brackets can shelter a significant amount from the taxman.

For example, basic rate tax payers could keep 31% more of their returns than if they invested without using an ISA wrapper. A higher rate taxpayer would benefit even more, keeping 84% more. Those to be hit by the new 50% rate would see the ISA produce 126% more.