HMRC appreciate that for a lot of higher rate taxpayers, all income would be taxed at source, for example under PAYE. The problem is that the PAYE system inherently has it’s weaknesses and errors can materialise when dealing with allowances. For example allowances can be over claimed, or under claimed. Add this to the fact that the higher rate of Tax is charged at 45% means that any mistakes quickly become material.
In addition to this, it is not uncommon for higher earners to have multiple sources of income, for example:
- Income from property
- Investment income, i.e. savings interest
- Dividend receipts from shares owned
- Foreign income
A lot of these sources would naturally put the onus on the Tax payer to file a Tax Return, regardless of the level of income.