Self Assessments

Top 6 Self Assessment mistakes to avoid

Tax filing can seem daunting, particularly when dealing with the technical intricacies of Self Assessment tax returns.

Self Assessment is a process HMRC uses to collect and calculate tax from self-employed people or those whose income is not taxed through the PAYE system. You need to file a Self Assessment tax return if:

  • You were self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)
  • You were a partner in a business partnership
  • You had a total taxable income of more than £150,000
  • You had to pay Capital Gains Tax when you sold or ‘disposed of’ something that increased in value
  • You had to pay the High Income Child Benefit Charge
  • You had other untaxed income sources, such as renting out a property

Tax returns, which are filed for the previous tax year ending on 5 April, must be completed by 31 October if in paper format, or 31 January if you are using the online form to submit it.

Every year, taxpayers make mistakes on Self Assessment that are severe enough to be penalised by HMRC. That’s why it’s important you file your tax return sooner rather than later.

This blog explores common Self Assessment mistakes and how to avoid them.

1. Incorrect UTR/ NI number

People often enter the wrong Unique Taxpayer Reference (UTR) or National Insurance (NI) number while filing tax returns. UTR is a 10-digit number that identifies you as a taxpayer. After you set up a Self-Assessment account for the first time, HMRC will issue you your UTR number.

While filing tax returns, you must enter your correct UTR; otherwise, HMRC will be unable to identify you, eventually voiding your tax submission. Always take the time to enter your UTR number carefully and cross-check it for accuracy. In case you forget your UTR number, you can find it on your previous tax returns or personal tax account. You can also contact HMRC or apply for a new one 20 days before the deadline.

2. Forgetting the tax file deadline

It might sound pretty obvious, but forgetting the tax deadline is one of the most common Self Assessment mistakes among taxpayers. People often miss the tax return deadline for several reasons, from being unsure about the deadline dates to having incomplete information required for the tax return.

But the taxman won’t wait; you must remember to complete and pay any taxes due in time to avoid fines for missing the Self Assessment deadline. Otherwise, HMRC can charge you between £100 and 100% of the tax bill for late filing penalty for Self Assessment, depending upon the circumstances.

The deadlines for filing a Self Assessment tax return are;

  • Paper returns should be filed by 31 October
  • Online returns should be filed by 31 January
  • Payment of any tax due by 31 January

3. Incorrect income declaration

Always mention all of your income sources and earnings to HMRC to ensure you pay the proper amount of tax.

The income sources to consider include rental income, profits from employment, salary, bonuses, interest from savings, pensions, government benefits, capital gains, and investment income.

Certain taxpayers have multiple income sources, such as running a business and a salaried job.

However, if you leave income sources out of your Self Assessment, HMRC will consider it intentional tax evasion, which can lead to huge penalties and other legal consequences.

Hence, to avoid these Self Assessment mistakes, you must keep a complete record of all income sources and ensure that everything is noted when filing the tax return.

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    4. Ignoring allowable expenses

    HMRC allows sole traders or self-employed individuals to claim allowable expenses for tax deductions, which are expenses generated solely and exclusively for business.

    Suppose you are a self-employed individual running your own business. In that case, you will have different running costs, such as travel expenses, office expenses, staff expenses, employee training costs, marketing expenses, legal and financial costs, and business development costs.

    Ensuring that only allowable expenses are included to offset the tax is essential. There might be multiple reasons, such as a lack of knowledge, genuine oversight, or needing to be more familiar with the list of allowable expenses that causes Self Assessment mistakes.

    It’s, therefore, advisable to maintain records of all your business expenses and double-check that they are eligible for claiming the correct amount.

    5. Missing supplementary pages

    While filing your Self Assessment tax returns, you may need to add supplementary pages for specific income categories, including share schemes, life insurance gains, tax reliefs from investments in venture capital schemes, and interest from gilt-edged securities.

    Often, individuals forget or are unaware that they should provide extra income information, which can lead to Self Assessment mistakes.

    For example, if you receive a life insurance payout, you must file the necessary supplementary pages with your SA100. These pages provide additional information about the sums received so that they can be taken into account for any tax calculation.

    It’s also important to avoid selecting an option by accident that requires you to provide additional information. For instance, if you mistakenly choose that you receive income from property when you don’t, HMRC will expect you to explain this income on a supplementary page, and they will return the form as incomplete.

    6. Overlooking tax-free allowances

    HMRC offers many tax-free allowances that will help reduce your tax bill. Tax-free allowance is an amount of income that is exempt from taxes, and the most commonly known one is the personal income allowance, which is £12,570. You do not have to apply for this allowance, which will automatically be added to your tax account.

    If your income exceeds the allowance, only the portion over the tax-free allowance will be subjected to taxes. For instance, if you earn £22,570, then you are eligible to pay tax on £10,000 that you have earned above the tax-free allowance.

    However, there are other tax-free allowances which are not applied automatically. For instance, you might get a tax-free allowance of up to £1,000 per year for earnings generated from trading and property. These are known as trading allowances and property allowances.

    Other allowances include marriage allowance, blind person’s allowance, maternity allowances, and childcare benefits, which you can claim if you are entitled to. Forgetting to claim tax-free allowances or registering the income incorrectly means HMRC will tax your entire income, and as a result, you will end up paying a lot more tax than usual.

    Final thoughts

    Navigating Self Assessment mistakes requires attention to detail, accurate record keeping, and a sound knowledge of the tax compliance process. However, making an error while tax filing is very common – after all, most people are not tax experts.

    If you need Self Assessment tax return help, we do have accountants who can pick up this job for you. 

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