The Distribution of UK Personal Income Tax Compliance Costs

Abstract

Governments are committed to reducing the regulatory burden on business and individuals, while at the same time transferring many tasks from bureaucrats. One such example is tax compliance where self assessment has raised concerns that such transfers may place a particularly heavy burden on lower income and elderly taxpayers. This is the first study since its introduction into the UK in 1996 of the regulatory burden which self assessment imposes on individuals. We identify both the total compliance burden and its components for individuals who might be expected to incur high compliance costs because they pay tax on non business employment income. We use a specially designed questionnaire and find that within this group the burden seems to have increased by less than 25 per cent. Compliance costs are regressive, but do not impinge disproportionately on the elderly. The compliance burden is determined by income, occupation, education (but not specifically in accounting subjects) and difficulty in attending to tax affairs, indicating some possibilities for reducing these compliance costs.