It will probably come as no surprise to contractor accountants to learn that many people in the UK are confused by our taxation system.

According to recent research from HSBC, 53% of adults do not know that their personal tax allowance is £6,475 and 81% do not know at what income level the higher tax rates kick in. Annual earnings between £37,401 and £150,000 are currently taxed at a rate of 40% and any earnings above £150,000 are taxed at 50%. Additionally, 54% have no idea what their income tax code is and more than a third of taxpayers never check their end of tax year P60 form.

Employees are just as confused as to what they actually pay income tax on. Over 50% did not realise that employee benefits are taxable and slightly under a third did not know that income from pensions was classed as taxable income. We fare little better when it comes to understanding income tax on our savings. 20% of adults didn’t know that the majority of savings were taxed and an additional 10% thought that cash ISAs, which are tax-free, did get taxed.

The results of the bank’s research were highlighted in the BBC Panorama programme on Monday, 11th October. Christine Foyster, HSBC’s senior manager of investments and savings told viewers that it was important for the British workforce to realise how much tax they should currently pay and the amount they have paid in previous years.

Taxpayers and limited company contractors in the UK should make sure they understand all aspects of the finances, including their tax allowances, if they want to make the most of their money, she added.

HMRC has admitted that more than a million taxpayers were charged too much tax last year, but if we do not understand the tax system, how many cases could have slipped through the net?

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Out of the UK’s 17 million strong workforce, nearly half of them haven’t even reviewed their pension plans, according to new data released recently by asset manager Barings. Contractor accountants might want to consider whether their clients fall into this bracket!

ISM Research conducted the poll on Barings’ behalf and found that 48 per cent of those interviewed had never reviewed their pension plan. 21 per cent of respondents admitted to reviewing their plan sometime in the previous year.

The survey, gathered information from 1,478 workers, weighing the answers by population, found that a full one third of the people who answered that they had indeed reviewed their pension plan couldn’t recall if they had chosen the default contribution option or not contributions.

Nearly 20 per cent of respondents that had no knowledge of where their pension funds were invested were either at the age of 55 or older.

Barings conducted similar research last year, and in a comparison of the findings, more UK workers are making their own investment decisions than in 2009, but there was also a 43 per cent increase in the amount of people neglecting to review their plans as well.

Marino Valensise, chief investment officer for Barings, stated that it was concerning to see so many people, including limited company contractors, have either a reduced interest – or no interest at all – in planning financially for their elder years.

Mr Valensise also commented on the responsibilities of the investment industry, calling for an improvement to the methods in which pension advice is given in order to ensure people have a more through understanding of risk levels and the kind of return they can expect from their investments.

In related news, the Fair Investment Company’s head of investment and pension research, George Ladds, recently recommended younger members of Britain’s workforce should consider retirement planning that includes investing in ISAs by contributing at least £50 on a monthly basis from age 30 and afterwards.

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