HMRC are under increasing pressure to bring in as much tax as possible. HM Revenue and Customs are trying to close a £32 billion tax gap from the tax year 2020/2021. This is the difference between the amount of tax that should be paid, against the actual tax paid. One way they are doing this is to clamp down on tax return mistakes. It is estimated the Revenue issued 90,000 penalties in the 20/21 tax year.
Many of these mistakes were made in self-assessment returns that were filed during lockdowns. This included landlords and freelancers who were completing the forms themselves, rather than getting the advice of an accountant or tax expert.
Here we look at some of the most common mistakes people make on a tax return, and ways to overcome them.
What Are The Most Common Tax Return Mistakes?
Miscalculating Your Sums
HMRC don’t want to see an estimate or a simple guess. They want to see the exact figure. It is important to get it right first time and to double-check the amount. The online forms will do a lot of the calculations for you. If you are concerned by how accurate the figures are, get professional advice to ensure the original figures you enter are correct.
Missing A Deadline
This is one of the most common mistakes. Be aware of the deadlines and make sure you have enough time to complete the forms. Your HMRC site will tell you what the deadlines are. Put simply, paper tax returns need to be submitted by October 31st. If you choose to do an online return, you’ve got a bit longer until January 31st.
If you miss a deadline you will be instantly hit with a £100 fine. This fine will increase each day until it is paid.
Not Checking The Detail
Completing the return online is the best way to avoid simple mistakes because the form is mapped out for you. It will also tell you straight away if you are missing anything by displaying the error.
Only Telling Part Of The Story
You need to be fully aware of every detail and every source of income you generate that may incur tax. These include income from property, life insurance gains, dividents, pensions, savings and salaries to name but a few. These all need to be included in your return.
Not Being Prepared
You need to keep records of all your expenses and sources of income. The taxman wants to see the full picture and a complete trail of receipts and invoices. Everything you put in your return needs to be backed up with evidence. You also need to keep them in a safe place in case they are ever asked for. If you are self-employed you will need to keep your receipts and invoices for five years.
Not Knowing Your Login Details
If you are completing your return online you need to know your password and key tax identifiers. These include your National Insurance Number and your Unique Taxpayer Reference (or UTR for short). If you are leaving things to the last minute and misplace these, it may take a week or longer to get HMRC to send you the details.
Not Including The Full Detail
HMRC won’t accept returns that include ‘more details to follow’ or ‘to be confirmed’. They only want to see the completed form with every bit of detail that should be in there. By giving yourself time, you can save your return online and come back to it again when you have the full detail.
How your claim your expenses is just as important as claiming the income you are generating. One offsets the other. It is important not to cut corners and also to be aware of what you can claim as a business expense. Do your research to find out what you can claim. Whilst it’s important not to claim anything that shouldn’t be counted as a business expense, it’s equally important not to miss out on anything you be claiming. By claiming everything you are entitled to means you will pay less tax.
If you would like advice on your tax affairs please contact us. on 0800 471 4546.