Tax return to complete?
5 costly self-assessment mistakes to avoid
The countdown to this year’s self assessment deadline…
However, with the filing deadline in just a couple of months, leaving your tax return until the eleventh hour could be an expensive mistake. Errors can lead to incorrect submissions and tax payments, whilst missing the deadline can mean being hit by HMRC penalties.
If you’d like the peace of mind of an experienced team taking care of your tax return this January, please contact us to arrange a free, no obligation quotation. However, if you will be preparing and submitting your own self-assessments, here are 5 costly mistakes to avoid.
1. Using the wrong tax code
It’s sounds obvious, but it is estimated that thousands of taxpayers may be paying too much (or too little) tax because they have the wrong tax code. Check your tax code on your tax return (which is usually 3 numbers followed by an L) is the same as that which appears on your payslip. Correcting a tax code that has been wrong for many years, has led to tax refunds running into thousands of pounds.
2. To claim or not to claim
When you aren’t preparing tax returns on a daily basis it is easy to fall behind on what is and isn’t allowed to be claimed. Naturally, you want to ensure that you are utilising all available allowances, but there can be costly penalties for incorrect claims. Speaking to your accountant or requesting information from HRMC will help you identify what can be claimed. If you are a higher-rate taxpayer and you made any donations to charity through Gift Aid during the tax year don’t forget to record these donations, as they will generate tax relief.
3. Not including interest on income
Probably the most common oversight is not including the interest that you receive from a bank or building society account, and this can be substantial. Make sure that before you start, you have all documents relating to your savings and investments, so that you can accurately state the interest earned. This includes interest earned from loans, online peer-to-peer lending, credit unions, friendly society accounts and dividends from UK companies. If you have received a large one-off payment, such as a PPI compensation payment that has generated interest, you should check whether this should be included. It doesn’t include interest from ISAs as this doesn’t need to be declared.
4. Incorrect pension contributions
If you pay into a pension you will need to enter those contributions on your tax return. Getting them correct is important, as too little and you will miss out on tax relief, but too much and HMRC could charge interest on any underpayment. However, if your employer deducts your pension contributions from your salary, usually you won’t need to enter these separately on your tax return, as the available tax relief will have been applied through your net salary.
5. Missing the deadline
Don’t leave your self-assessment until the last minute. Penalty fines can range from £100 to 100% of your tax bill (effectively meaning you pay your tax twice over), so it really is worth making sure you file your tax return correctly and on time.
Sometimes it’s best leaving matters to an experienced advisor so that you can spend your time with your family, your business or things that you find less painful and more rewarding.
We are a multi-award winning team of accountants and trusted advisors supporting businesses and individuals. From removing the worry if you have simple tax affairs, to advising on complex tax matters including capital gains, inheritance tax, property portfolios and investments, our dedicated tax team have the experience to support you.
Contact our tax team for a no obligation quotation and relax on 31 January.