Self-employed individuals are having difficulties completing their self-assessment tax return, according to a new report commissioned by HMRC.
The report found that many struggle with their tax reporting responsibilities due to “confusing terminology, ambiguity around allowable business expenses and uncertainty transferring figures to HMRC’s system”.
The research was undertaken by Kantar, a data and insights company, on behalf of HMRC. It revealed a consensus among the self-employed that the first year of business was the most challenging in terms of tax duties.
Many found it stressful just finding out what they needed to do when starting out as self-employed and this was compounded by a fear of making mistakes that could prove costly.
An ambiguity around business expenses and the complexity of calculating the amount that can be claimed were also raised as common issues in the research, even among those who felt they had a “strong knowledge of the tax system”.
A lot of business owners said they were unsure about what is classed as a business expense for tax purposes, especially when the item in question can be used both for business and personal purposes.
Many who were polled had tried to get clarity by searching online or by contacting an accountant, but still felt an “ongoing uncertainty” in relation to their tax obligations.
Income complexity also influences the experience of the self-employed with their taxes, according to Kantar – in particular, the number of jobs they have and the number or length of contracts.
Although many low earners below the tax threshold said they were unconcerned about their taxes, some still said they would get help from an agent for reassurance if they could afford one.
They said that an agent or accountant could “help them understand confusing terminology and ensure boxes are ticked and figures are input correctly.”
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