Education on Tax Could Save £6bn a Year

One of the sore spots for accountants is the growing number of small business owners and freelancers who are not only inexperienced with finance and accounts, but completely unaware.

This might sound like it would be better business for accountants, but in reality it simply means more time is spent explaining systems, rather than completing accounts.

The underlying issue in these cases is that there is a lack of tax education available.

This is only confirmed by the fact that the Treasury loses around £6 billion each year due to carelessness when filing tax returns.

Revenue and Customs reported in 2017 that £34 billion of tax revenue was uncollected during the 2015 and 2016 financial year.

£3.3 billion of this was lost due to simple errors, while £6.1 billion was lost due to a “failure to take reasonable care”.

Why teach tax?

With more people becoming self-employed and directors of companies, it’s important that their financial responsibilities become part of a wider dialogue on managing money.

While adults might be expected to be able to look up the questions they have, the most reasonable solution is to educate younger people about tax.

If tax were to be taught to younger people as part of their education, there’s less chance that these errors would be made as they would have an understanding of what’s expected of them – ultimately reducing the number of errors we see on submitted tax returns.

Educating pupils in tax affairs would also provide them with a wider understanding of tax which would fair them well even if they choose not to become a freelancer or company director.

An understanding of tax in general would prepare the younger generation for any tax affairs they may face in the future, and give them a better understanding of the system in general.

What education is currently in place?

While maths and business are subjects currently available to students of varying ages, there is little that is tax-specific.

Unless you’re studying to become an accountant, or are taking a business-specific course, there’s little in the way of knowing what tax you should pay.

Of course, there’s always the option of studying tax after school.

One Google search for ‘Education on Tax UK’ brings in a flood of results from how to save tax when paying private tuition fees to paying tax while you study – not exactly what we had in mind.

And while companies like PwC have piloted initiatives to teach pupils about tax, it simply does not seem to be enough to educate future entrepreneurs about their tax responsibilities.

Lucy Brennan, partner at Saffery Champness, told The Times: “Future taxpayers leave school with very little tutoring in financial matters and, as more and more people work flexibly or are self-employed, are entrusted to manage their tax affairs.

“The burden of responsibility is shifting increasingly onto the taxpayer and without building in education this sort of shortfall is sure to continue, if not worsen.”

How software can help

Until education on tax becomes part of the national curriculum, it’s worth recognising that cloud accounting software can help.

For those who are concerned about errors in their accounts, cloud accounting software with automated features can help you avoid any unnecessary mistakes by flagging them up before you submit them to HMRC – meaning you won’t be subject to any fines.

For more information about how Pandle can help you avoid fines and automate your accounting process, get in touch with our team on 0203 393 7434.

Do you think more education around tax is called for in the UK? Join the conversation by posting a comment in the section below.