A survey found that the problem was particularly prevalent among employees of smaller businesses, with 77% of SME employees believing, incorrectly, that it is not their responsibility to check they are paying the right amount of tax.
New research has found 45% of SME employees have paid too much tax due to errors in their pay check as a result of misunderstandings about payroll, highlighting a need for more guidance from accountants.
The research, undertaken by QuickBooks to coincide with national payroll week (2nd – 6th September) surveyed over 2,000 people in the UK about their understanding of their payslips, and found several confusions regarding tax codes and responsibility of checking if they are paying the correct amount.
Shaun Shirazian, head of product at QuickBooks in the UK said: “Many of us can feel a bit lost when checking our payslips and feel unsure about the multiple factors that contribute to our adjusted pay."
“Taxes are complex and the research shows that significant overpaying of tax is caused by payroll issues, such as being on the wrong tax code, or errors with deductions such as childcare vouchers.”
An SME payroll problem
The survey found that the problem was particularly prevalent among employees of smaller businesses, with 77% of SME employees believing, incorrectly, that it is not their responsibility to check they are paying the right amount of tax. In addition, 66% do not realise how multiple jobs affects their tax, and 19% not even checking their payslip.
These results of the survey suggest that employees need more guidance when it comes to getting their tax codes and pay checks correct, something that payroll accountants can help their clients and employers get right.
While it may not be an employer or accountant’s responsibility to ensure employees and clients are paying the correct tax, it is an opportunity to help employees and to add value to the services offered by an accountant by assisting those who are unclear on their tax code and responsibilities.
“Small businesses in particular have so many different areas of a business to manage, often with limited support in terms of man-power,” Shirazian said. “They want to do all they can to get pay right for their employees but – as this research shows – there are sometimes a multitude of challenges in ensuring this is watertight.”
Guidance needed for employees
Nearly one in five surveyed called out small business owners as being the ones responsible for ensuring that they are paying the correct tax, showing the need for more education among employees on their responsibility with regards to their own pay checks.
For accountants advising clients and employees on the correct payroll calculations, the Government tax codes guide is a good place to start.
1250L is the tax code currently used for most people who have one job or pension.