Every year, countless taxpayers stumble through their tax returns, and this year is unlikely to break the trend. But fear not, knowing the pitfalls is the first step to sidestepping them.
Missing Deadlines
Missing the self-assessment tax return deadline is a costly blunder. If you file or pay your taxes up to three months late, you’ll incur a £100 penalty. The longer you delay, the heftier the fines. Don’t underestimate the time needed; starting early ensures you meet the deadline. If you foresee payment issues, arrange a plan with HMRC. Your accountant can be your timekeeper, maintaining records year-round and submitting forms on your behalf.
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.
Tax Relief Blunders
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 important to keep detailed records of any business expenses throughout the year, too. 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.
Payments on Account Oversight
On top of your bill for the current 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.
It also pays to think ahead. If you think your tax bill will be lower than last year, you can ask HMRC to reduce your payments on account online. Furthermore, looking at HMRC’s guidance on payments on account can help you prepare.
Getting 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.
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