As we approach the New Year, many people will be completing self-assessment tax returns ahead of the 31 January deadline.
This can be a stressful time of year: money can be tight and working out how to use HMRCs self-assessment system isn’t always simple.
Most people can’t afford an accountant to do it for them – so it’s often those on the lower end of the income scale who get caught up and penalised by HMRC for making mistakes.
Figures out in October showed that HMRC has issued fines to 83,000 self-employed people on low incomes for failing to file a tax return on time.
These people were earning too little to pay any tax at all – below the £12,570 personal allowance – but they’re still required to complete a tax return. They were fined for not submitting one on time.
This is unfair and is hitting those on the lowest incomes hardest, rather than focusing resources on catching people that are actively trying to avoid paying their taxes.
Years on the phone
These fines are even more unfair given the difficulty many face in contacting HMRC for tax advice.
New figures show that waiting times, when trying to phone HMRC, continue to rise. In total tax payers spent 719 years on hold to HMRC in the last year.
Only 42% of calls get through to an advisor, while the rest are abandoned, deflected or played an automated message. This is no surprise if you consider the funding pressures HMRC has faced in recent years, hollowing out its ability to be an effective tax authority.
HMRC say they are trying to shift support away from call centres towards digital support, but this brings challenges for those that are less digitally connected.
Invest and reform
If HMRC is to be a fair and effective tax collecting authority, it must be open and accessible to taxpayers: especially those on lower incomes.
They must allocate more resources to customer service, and make it easier for tax payers with queries to contact them.
This will require a lot more investment. It is encouraging to see the government announced 5,000 new HMRC staff in the Budget.
This will help close the ‘tax gap’ (the difference between the amount of tax that should be paid, and the amount that is), which has grown in recent years
Investment in HMRC will help collect a lot more tax from those currently evading it, especially at the top end.
This is where HMRC must focus its investigative energies, rather than on those at the bottom of the income scale.
As tax lawyer Dan Neidle points out: fining people on low incomes has only been the case since 2010, it hits the poorest hardest and the government should reverse this policy.
HMRC needs to fight tax dodging by the richest – and stop penalising the poorest.