The confusion is spread across all forms of major tax with 36% of UK full or part-time workers not understanding the current VAT rate, 59% not knowing the salary level at which the 20% tax rate is payable, with just 10% aware of the amount owed for National Insurance.
“We’ve uncovered some pretty glaring gaps in knowledge and poor basic practices,” said Phillip Venn, commercial director at online accountancy group Boox, who conducted the report.
“With more people than ever before required to complete self-assessment and the freelancer market looking buoyant in 2014, it’s vital that we help people understand their tax.”
Despite freelancers holding extra responsibility for their taxes, the study revealed that this group are no better informed when it comes to tax matters than the average UK employee.
Over 1.2 million of the UK’s 4.2million freelancers are making errors, missing deadlines and as a result, having to pay fines when filling in their tax returns. A third of freelancers are not aware of the current VAT rate, and nearly two thirds (64%) either don’t know or incorrectly guessed the salary level at which the 20% tax rate is payable.
The research doesn’t bode well for the estimated record 10.9 million Britons who will file self-assessment tax returns this year. Last year HMRC collected a record £85m for tax penalties.