Thousands of taxpayers make mistakes when completing their self-assessment tax returns each year, and this year will likely be no exception. However, once you know the most common mistakes, you can start to take steps to avoid them.
Missing the self-assessment tax return deadline can be expensive. People who file or pay their tax return up to three months late will need to pay a £100 penalty to HMRC, with increased fines thereafter. For those that pay their tax late they will not only be charged interest, but also a penalty which will be based on a percentage of the amount of tax outstanding.
Taxpayers often underestimate how long the process will take, so starting your return earlier will give you more time to meet the deadline. If you think that you won’t be able to pay your bill in full by 31 January, you can arrange a payment plan with HMRC.
Submitting incorrect figures
It’s easy to make mistakes when you’re in a rush, so it’s important to give yourself plenty of time to double-check your calculations. Submitting incorrect information may result in an investigation by HMRC, or even prosecution in the case of deliberate wrongdoing.
Maintaining accurate and up-to-date records throughout the year can help you avoid this problem, as well as make it quicker and easier to submit your return. If you do make a mistake on your tax return, you can make a change up to a year from the amended deadline.
Underclaiming or overclaiming tax relief
It’s important to claim the right amount of tax relief. People who miss out on available reliefs and allowances end up paying more tax than they owe, while those who overclaim may face an investigation from HMRC – or even prosecution.
Tax can be complicated, and legislation changes all the time, so getting it right requires a keen eye for detail and some expertise. Working with a chartered accountant can help you retain more of your earnings, while ensuring that you are compliant with any rules and regulations.
It’s crucial to keep detailed records of any business expenses throughout the year. While you may not have to submit them with your return, you’ll need to keep them on hand in case HMRC asks for proof.
Forgetting about payments on account
On top of your bill for the 2021/22 tax year, HMRC may ask you to make an advance payment towards your next self-assessment bill. This is called payments on account, and can result in you paying 50% more than you were expecting on 31 January.
You’ll need to factor this cost into your budget and submitting your forms well in advance will give you time to set enough money aside. Likewise, you can start budgeting for the second instalment, which will be due 31 July 2023.
Making sure you get it right
Many taxpayers choose to do their self-assessment tax return by themselves but hiring an accountant can have a lot of benefits, especially if you run your own business or have multiple sources of income. If certain factors make your return more complicated, getting it right may require an expert eye. Calculating business expenses can be difficult, for example, especially if you use some items for both personal and business reasons
It’s not just businesses that can benefit from this expertise. Hiring an accountant to file your return on your behalf can help ensure everything is submitted accurately and on schedule, and help reduce your tax liabilities.
Your accountant can also help you manage your finances and maintain accurate business records throughout the year. That way, filing your return next time will be much more straightforward.
Looking for help with your tax return? Speak to an expert about your self-assessment tax return.