Self-assessment is how HMRC takes out income tax from people who work for themselves or make money that isn’t taxed through Pay As You Earn (PAYE). If you make money that isn’t taxed by your workplace, you’ll need to fill out a Self Assessment tax return and tell HMRC about that money. You’ll then have to pay the right amount of tax. This is for directors and/or owners of a limited company who might get profits or take out a director’s loan. You have to report these kinds of income on your tax return. Would you like to pay the least amount of tax possible? We’re here to help you, so don’t worry. There are some self assessment tax return mistakes to avoid to minimise costs of money. We will show you how to avoid those mistakes.
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Most Common Self Assessment Tax Return Mistakes to Avoid
Below is a discussion of the most common self assessment tax return mistakes to avoid:
Failed to Keep Records Up to Date:
Without accurate records, you might forget to include certain payments or costs, which could cause mistakes in your self-assessment.
Set up a strong method for keeping records. Keep track of your income. Make sure you don’t miss anything by making time to update these records on a daily basis. Working with a reliable and experienced accountant is always a good idea. They can help you through the process and answer any questions you have about accounting.
Fail to Declare all Income and Allowable Expenses:
People may not report all of their income on their taxes. Have you thought about renting out your home, doing independent work, getting money from outside the country, or investing?
Keep careful records of all the ways you earn money throughout the year. Make sure nothing is missed by checking bank records, bills, and any other communication.
Many independent contractors fail to report all of their expenses, such as professional services, office supplies, and business travel. Most of the time, this means paying more tax than you need to.
Keep a thorough record of your spending and keep your receipts. To make sure you’re getting all the tax breaks you’re entitled to, look at HMRC’s instructions or talk to a professional tax advisor.
Missing the Filing Deadlines:
Not turning in your tax return by the due date is the most common and expensive mistake. Online submissions normally have to be made by January 31st, which is after the tax year ends. If you miss it, you’ll have to pay a £100 fine right away. The fine goes up every minute you wait. Set several notes ahead of time. Try to finish your tax return at least one month before the due date, just in case something goes wrong.
Wrong UTR or NI Number:
Your UTR, or Unique Taxpayer Reference, is a ten-digit number that only you and HMRC can use to identify you. Here’s what to do if you lose your UTR number: you’ll need it to fill out your self-assessment tax report. Be careful when you go in. If you have never filed a self-assessment tax return before, you need to tell HMRC that you are self-employed. They will then give you a UTR number.
Your proper National Insurance number should also be on your Self Assessment tax return. You can find this number online by going into your personal tax account or by looking through an old payslip or P60. If that doesn’t work, call HMRC. Keep all these records checked for self assessment tax return mistakes to avoid.
Failed to Report Capital Gains:
You could have to record capital gains if you sold shares, real estate, or other assets during the tax year. It is very common to have self assessment tax return mistakes to avoid Examine the investments you made throughout the tax year and figure out any gains. Consult a tax advisor if you’re not sure.
Ignore Contribution to Pension:
Your tax burden may be impacted by contributions to pension plans, but many taxpayers fail to properly disclose them, losing out on any tax benefits. On your tax return, make sure to include all pension contributions and to claim any applicable relief. For precise information, check with your pension provider.
Ignore Charitable Donation:
For higher and extra rate taxpayers, charitable contributions made under the Gift Aid program qualify for additional tax relief that may only be claimed on the tax return. On the other hand, those who don’t owe money could have to pay back part of the tax breaks that were previously given to the charity.
When donating to a charity, make sure you only click the Gift Aid option if you are a taxpayer. Make sure to include any Gift Aid contributions on your tax return and maintain a record of all the gifts you make during the year.
Errors in Payments and Accounts:
People who file their own taxes often forget to plan for payments on account when they are doing their self-assessment tax return. A payment on account is a payment that HMRC asks you to make ahead of time towards your next tax bill. This includes any Class 4 National Insurance payments you make as a self-employed person.
Once you’ve turned in your self-assessment, you’ll have to make two fees each year. Each payment is equal to half of your tax bill from the previous year. Account payments are usually due by midnight on January 31 and July 31 of each year. Always remember that you won’t have to pay on account if
- When you filed your last tax return, it was less than £1000.
- More than 80% of the tax you owe has already been paid.
If you want to avoid getting shocked by how much your tax bills are, you should plan ahead and set money aside for your payments. That way, when your bill is due, you’ll already have the money to pay it. You will have to pay bigger bills as your business growth increases
More Mistakes in the Self-Assessment Tax Return
Within a year following the filing date for the tax year to which the return relates, you can fix errors on your self-assessment tax return. Therefore, you must make changes to your tax return by January 31, 2025, for the 2022–2023 tax year. If you miss this deadline, you will have to write to HMRC. Your tax bill will be updated by HMRC if you make any changes to the data.
HMRC may simply fix any little mistakes it finds in your Self-assessment tax return or get in touch with you if it has any questions. If your self-assessment tax return contains a mistake, HMRC may request that you pay extra tax or, if you have overpaid, may refund the excess.
A penalty is rare if you made a sincere, little error and returned the item with appropriate care. If you have more significant problems, such as knowing and purposefully hiding your income or inflating your expenses, HMRC may investigate your tax affairs, issue you with bigger tax bills, and impose harsher penalties.
Conclusion
Timely action, comprehension of tax laws, and careful record-keeping are necessary for typical self-assessment tax return mistakes to avoid and to get yourself safe from penalties. You may assure compliance with UK tax rules, reduce the possibility of mistakes, and expedite your Self Assessment process by putting the suggested solutions into practice. To properly handle complicated tax issues, don’t be afraid to get expert counsel when in doubt. We have covered the most common self-assessment errors, some additional common errors, and what to do if you need to make adjustments to your tax return. You will learn how to prepare for tax season, what to avoid, and how to reduce your overall tax liability from this post.
Get in touch with our young, clever, and tech-driven professionals if you want to choose the solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.