2.67 million Brits fill in tax returns but owe nothing

Millions of British taxpayers are filling in time-consuming self-assessment tax return forms each year despite owing no money to HM Revenue and Customs (HMRC).

That’s according to official HMRC data which found that 2.67 million people (16 per cent) file tax returns owing nothing to the tax authority.

A quarter of the record 11 million taxpayers filling in tax returns actually owe less than £50 or nothing at all at the end of it.

A great deal of these people are self-employed people earning less than the £10,600 income tax threshold, but an increasing number of employees are also required to file self-assessment forms.

Professionals who earn more than £100,000 or directors of companies must automatically submit tax returns even in the event they have no additional undeclared income.

Meanwhile thousands of parents now also fill in self-assessment returns amid changes to child benefit two years ago. The outcome of which is that some or all of it can be clawed back from higher wage earners.

Chas Roy-Chowdhury, head of taxation, Association of Chartered Certified Accountants (ACCA), believes changes to the current self-assessment system are required to reduce the number of employers filling out forms unnecessarily.

“For self-employed people, self-assessment makes sense. But more and more employees are also being dragged into the self-assessment net, especially after the changes to child benefit,” said Roy-Chowdhury.

“The high number of people filling in forms unnecessarily is expensive for the taxman to administer and fills many taxpayers with dread – like a trip to the dentist.

“HMRC receives information from employers, banks and financial institutions on the pay and dividends workers earn, so a bit more joined up thinking should enable them to better use this intelligence to work out when employees owe something and amend their tax code accordingly.

“The current system means many workers are bothered with the hassle of filling out self-assessment forms when they do not owe anything.

“Since self-assessment relies on workers being honest, workers earning over a certain amount or directors should also be trusted to tell the taxman when they have something additional to declare.”

An HMRC spokesman said that the tax authority had no desire to make anyone fill in a tax return “unless it’s absolutely necessary”.

“That’s why we automatically remove 400,000 people from self-assessment every year,” added the HMRC spokesman.

“For those who do, we’ve made it easier than ever to send in a self-assessment return by bringing in short tax returns and online self-assessment, and we are taking this much further by introducing the new digital tax accounts.

“If you don’t think you need to be in self-assessment, contact us, and, if we agree, we’ll take you out of the system.”

Date published 18 Jun 2015 | Last updated 18 Jun 2015