Tax & admin · 27 October 2017

60 per cent of self-employed under-report income to HMRC

The cash amount of tax not un-reported averaged around 2, 200
The cash amount of tax not un-reported averaged around 2, 200
B&b owners and taxI driversare among those most likely to under-report income to HMRC, according to new analysis that has suggested as many as six in ten self-assessment tax returns fail to declare the full amount owed.

Usingdata from HMRC tax audits undertaken from 1999 to 2009, the Institute for Fiscal Studies (IFS) think tank was able to find out which kinds of tax payer were most likely to under-report on their self-assessment returns, and in which industries the widest tax gaps? were found.

Thefindings suggested that as self-employment booms in Britain, nowrepresenting 15 per cent of the workforce, the Treasury has struggled to recoup the maximum tax revenue. In the last financial year, the UK’s overall tax gap is alleged to sit at 34bn, meaning unpaid tax represents six per cent of the country’s overall tax liability.

Most underpayments werediscoveredto be below 1, 000, but a small four per cent minority owed over 10, 000 accounting for almost of missing tax revenue from self-assessment.

Read more: HMRC looks to small businesses to plug tax gap

The study found that over half of all tax owed from self-employed workers in thehospitality and transportindustries was undeclared. In those sectors, bed and breakfast owners and taxI drivers were most likely to under-report their income to HMRC.

Strong gender differences were also uncovered in the analysis. Just over a quarter of women filing self-assessment returns under-reported their income, but among men this figure rose to 40 per cent.

Age could also be a factor in non-compliance. Around 40 per cent of those below pension age were failing to declare entire incomes, while only one in five pension-age workers were guilty of under-reporting on self-assessment.

Commenting on the findings, Helen Miller, IFS assistant director, said the study had been able to shed light for the first time on exactly where tax revenue was lost.



Praseeda Nair is an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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