What common mistakes do people make on tax returns?
Filling out a Self Assessment tax return can be daunting and difficult. They're often loaded with technical jargon, and mistakes can cost you. Here are some common blunders to watch out for.
Mistake #1: The simple things
It’s often the simplest details that trip people up. You might have calculated every last penny of every last expense. You might have kept and organised all your bank statements and payslips. However, all that care and effort mean nothing if you forget to sign and date your paper tax return. With any documents you’re sending, check whether you have to use the original form or if a scan or photocopy is okay - or whether the taxman needs a physical signature.
Quick tip: Filing online might be a smart move to avoid easy mistakes like this.
Mistake #2: Skimping on details
What HMRC want from your tax return is a complete overview. They won't be satisfied with anything less. Skipping over things you aren't sure of or writing "details to follow" will only land you in hot water. Always use cold, hard numbers when they're asked for.
Quick tip: Remember you can save your progress on the returns website. If you're waiting for exact figures or details, you can always come back and fill them in later. Just remember to get it all finalised before the deadline.
Mistake #3: Getting your sums wrong
Another obvious one. If HMRC ask for a figure, they mean they want the EXACT figure. Don't guess or estimate. Get it right and double-check it.
Quick tip: The website forms will do quite a lot of the actual calculations for you. Consider getting professional help if you’re still not sure.
Mistake #4: Missing a deadline
This is a big one. Paper tax returns have to be filed by the 31st of October. If you're doing it online, you've got until the 31st of January. The fines for missing a tax return deadline start at £100 for being even a single day late. After that, things just get worse.
Quick tip: Once more, filing via the website gives you a little extra breathing space. Remember to check your account details on the HMRC site regularly. You'll see at a glance what deadlines might be looming.
Mistake #5: Fiddly details
This is a broad category, and there are a lot of tiny details that can catch you out. For example, make sure your National Insurance number and Unique Taxpayer Reference (UTR) number are correct.
Quick tip: If you lose track of your UTR, you can find it on any correspondence you get from the taxman. Even if you can't remember it, he will.
Mistake #6: Messy expenses calculations
Claiming your expenses correctly is a huge part of getting your tax return right. There are strict and complicated rules about what counts as a business expense. Don't cut corners learning them. The taxman has no sense of humour when people claim for things that aren't allowed.
Quick tip: This mistake can cut both ways. A lot of people miss out on expense claims they could make, and end up paying way too much tax
Mistake #7: Not telling the whole story
It can take a lot of work to fill in all the blanks when your finances are complicated, but it's worth it. Remember that this information can actually save you money or qualify you for tax relief. Depending on your situation, you might have to give details of things like:
- Life insurance gains.
- Stock dividends.
- Income from property.
- Any benefits you're claiming.
- Income from savings and pensions.
Quick tip: The Self Assessment tax return form has a space for "additional information". Remember to use it if you need to add details not covered by the rest of the form.
Mistake #8: Not doing your homework
Filing a Self Assessment tax return means paperwork. From the money you've got coming in to the miles you're travelling, you need to get used to keeping good business records.
The taxman isn't interested in seeing a rough outline of your finances. He wants the full picture. If you're claiming expenses, you need receipts. If you're billing clients, you need invoices. Depending on the business you're in, there could be a range of details to keep track of. You've got to be able to prove everything you say in your return.
Quick tip: If you're working PAYE and filing a tax return, you need to keep your records for at least 22 months after the end of the tax year. If you're self-employed, you need to hang onto them for 5 years!