More than half of taxpayers do not know how much income tax and NICs they pay in a year, HM Treasury said as it announced the launch of a new tax calculator on Monday. The calculator enables people to work out ‘how much tax they pay and how the government spends it’, the Treasury said, but some commentators suggested that it was misleading to categorise payments of state pension as spending on ‘welfare’.
The calculator, designed for people who pay their tax through PAYE, is available online and as an app for mobile phones.
The online version ‘fell over’ on its first day. An HMRC spokesman told the BBC that 400,000 people had tried to use the site during the morning. ‘Our online calculator is extremely busy at this time but a full service is being restored. The mobile app is unaffected,’ he said.
In a survey of more than 2,000 adults, conducted by TNS for HMRC in February, 70% of those who received bank statements said they always checked their transactions, but only 26% of PAYE and self assessment taxpayers said they always checked their income tax and NICs.
Half of the respondents said they ‘never’ checked their income tax and NICs – mostly because they assumed their deductions were correct.
State pensions
Michael Izza, Chief Executive of the ICAEW, noted on his blog that ‘the calculator shows very clearly that social security (33%), health (17.4%) and education (13%) are the biggest areas of government spending by quite a long way’. The mobile app uses the term ‘welfare’ to describe the largest category of public spending, and Bill Dodwell, Head of Tax Policy at Deloitte, said few people would immediately appreciate that the category included the state pension.
It would be sensible, Dodwell said, if the spending details split ‘welfare’ between the state pension and ‘other areas of welfare spending’.
The Guardian reported: ‘Some Tories believe that personalising these figures, and encouraging people to become aware of them, will strengthen public support for spending cuts.’
The paper noted that VAT and other indirect taxes were not included, and added: ‘The way spending has been described may generate controversy. For example, many people may associate welfare with benefits to the unemployed, while by far the biggest single item in the welfare budget is the state pension.’
Limitations
The app has ‘severe limitations’, Dodwell said. ‘It only calculates tax and NIC on a single figure of income and doesn’t allow for savings income, Gift Aid, or pension contributions. It doesn’t work for pensioners. Overall, it’s too simple to be much use – and it doesn’t work on tablets. It feels like version 0.1 – and we hope that HMRC’s developers will produce something rather better quickly.’
He added: ‘The online version is much more detailed and informative, but doesn’t show the polish we expect from modern websites. In particular, why do the online results not combine income tax and national insurance contributions? It is surprising that the calculator doesn’t include dividends. Also, the calculator cannot manage married pensioners or pensioners with an income over £24,000.’
The ICAEW Tax Faculty observed that the calculator was ‘a fun piece of marketing’ that would be ‘helpful to some taxpayers who don’t have advisers’.
Budget 2012 announced that from 2014/15, 20m taxpayers would receive a personal tax statement showing how much tax they have paid, their average tax rate, and ‘how this contributes to public spending’.
More than half of taxpayers do not know how much income tax and NICs they pay in a year, HM Treasury said as it announced the launch of a new tax calculator on Monday. The calculator enables people to work out ‘how much tax they pay and how the government spends it’, the Treasury said, but some commentators suggested that it was misleading to categorise payments of state pension as spending on ‘welfare’.
The calculator, designed for people who pay their tax through PAYE, is available online and as an app for mobile phones.
The online version ‘fell over’ on its first day. An HMRC spokesman told the BBC that 400,000 people had tried to use the site during the morning. ‘Our online calculator is extremely busy at this time but a full service is being restored. The mobile app is unaffected,’ he said.
In a survey of more than 2,000 adults, conducted by TNS for HMRC in February, 70% of those who received bank statements said they always checked their transactions, but only 26% of PAYE and self assessment taxpayers said they always checked their income tax and NICs.
Half of the respondents said they ‘never’ checked their income tax and NICs – mostly because they assumed their deductions were correct.
State pensions
Michael Izza, Chief Executive of the ICAEW, noted on his blog that ‘the calculator shows very clearly that social security (33%), health (17.4%) and education (13%) are the biggest areas of government spending by quite a long way’. The mobile app uses the term ‘welfare’ to describe the largest category of public spending, and Bill Dodwell, Head of Tax Policy at Deloitte, said few people would immediately appreciate that the category included the state pension.
It would be sensible, Dodwell said, if the spending details split ‘welfare’ between the state pension and ‘other areas of welfare spending’.
The Guardian reported: ‘Some Tories believe that personalising these figures, and encouraging people to become aware of them, will strengthen public support for spending cuts.’
The paper noted that VAT and other indirect taxes were not included, and added: ‘The way spending has been described may generate controversy. For example, many people may associate welfare with benefits to the unemployed, while by far the biggest single item in the welfare budget is the state pension.’
Limitations
The app has ‘severe limitations’, Dodwell said. ‘It only calculates tax and NIC on a single figure of income and doesn’t allow for savings income, Gift Aid, or pension contributions. It doesn’t work for pensioners. Overall, it’s too simple to be much use – and it doesn’t work on tablets. It feels like version 0.1 – and we hope that HMRC’s developers will produce something rather better quickly.’
He added: ‘The online version is much more detailed and informative, but doesn’t show the polish we expect from modern websites. In particular, why do the online results not combine income tax and national insurance contributions? It is surprising that the calculator doesn’t include dividends. Also, the calculator cannot manage married pensioners or pensioners with an income over £24,000.’
The ICAEW Tax Faculty observed that the calculator was ‘a fun piece of marketing’ that would be ‘helpful to some taxpayers who don’t have advisers’.
Budget 2012 announced that from 2014/15, 20m taxpayers would receive a personal tax statement showing how much tax they have paid, their average tax rate, and ‘how this contributes to public spending’.
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